Mounting dissatisfaction

The level of public anger about card issuers shows in the results of our nationally representative survey of 1,211 Americans, conducted in July, as well as in scores of irate letters and e-mails we've received. Twenty-one percent of those we surveyed said they were treated unfairly by card companies, and only 41 percent said they were highly satisfied with their card issuer, making credit cards one of the lowest-rated services we cover. By a ratio of 4-to-1, respondents said they were charging less than they did last year, and 32 percent said they'd paid off and closed a card since January 2008. Half of them told us they did so in direct response to the actions of credit-card issuers, such as cutting limits, hiking rates, or imposing fees.

A new federal law effective in February will force issuers to be more consumer friendly (see What's changing and what isn't). But until then, credit-card issuers are trying to offset losses from the economic downturn and the likely drop in revenue that will result from the new law. TowerGroup, a financial-research company in Needham, Mass., expects average annual percentage rates (APRs) to rise to 19 percent from about 14 percent today, even as other consumer interest rates, such as those for mortgages, are at historic lows. Plus, 27 percent of cards issued in the first three months of 2009 carry annual fees, up from 18 percent in 2008.

Fees for exceeding your credit limit, prohibited under the new law, are evaporating. In their place are higher charges for cash advances, balance transfers, and foreign transactions. "Card companies are making subtle changes, a little scaling back of rewards, a little fee increase here and there," says Curtis Arnold, publisher of CardRatings.com, which lets you compare card offers. "They're nickel-and-diming customers, but it all adds up."

Some issuers have bumped up minimum monthly payments. Chase has imposed 5 percent minimums for some customers, up from 2 percent. That can help consumers pay down balances more quickly, but it can also saddle them with bills they can't pay.

That's what happened to Rhonda Davis of Bailey, Colo. She took advantage of Chase's "convenience check" offer carrying a 3.99 percent interest rate for life to buy a car three years ago. Her monthly payment was $275, which she made on time every month. Then Chase told her that her minimum monthly payment would be raised from 2 percent to 5 percent, hiking her payment to $687. Davis, a potter and business owner, tried to negotiate, with little success. "When I called the credit-card company to ask questions so I could understand the purpose of their actions," she says, "they told me it was a tough economic environment for everyone and they just can't continue to lend money at the rate I have."

So what can you do to protect yourself? That depends on how you use your credit cards. Our survey showed credit-card users falling into three camps. One group is made up of consumers who generally pay their bills on time but use cards for convenience or to rack up rewards. Then there are those who reported moderate balances and reasonable prospects of eventually paying off that debt. The third group includes consumers with debts totaling $10,000 or more, often from spending for emergencies; 44 percent of that group said they wouldn't be able to survive financially over the next six months without relying on their credit cards to meet monthly expenses. Following are strategies geared specifically to each group.

• The on-time payer
• The low-balance cardholder
• Users with growing balances