How Would A Double-Dip Impact Credit Card Rates?

After a big stock market decline on Thursday, and smaller but continued dip in stock values Friday morning, many people are wondering whether our long-struggling economic recovery may actually be headed for a double-dip recession. (Some people doubt whether the recovery ever really started.)

What does all this mean for your credit? If you’ve had a credit card for more than a year, watch your statements like a hawk, says Beverly Harzog, Credit.com’s expert on credit cards.

Because right now is exactly the time when credit card issuers like to raise interest rates.

“Credit card issuers don’t like unpredictability, and right now it’s a very unpredictable time,” Harzog says. “The issuers get spooked and start worrying about their revenue down the line. So they say: ‘Let’s raise their rates on people right now, in case things go really bad economically.'”

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If you’ve had your credit card less than a year, there’s less need to worry because the CARD Act bars issuers from raising rates on new cards within the first year except in certain circumstances, such as an extremely late payment. But for people who’ve had their cards longer than a year, the most important thing to do is also the simplest: Read your monthly statement.

“Open your mail,” Harzog says. “It really is your first line of defense” against surprise rate increases.

If you’re looking to get a new card, a double-dip recession means you should probably act fast. After the big economic meltdown of 2008, credit card issuers pulled back, offering far fewer cards to fewer people than they did during the housing boom. Eventually they eased up, first by offering cards to people with stellar credit, and only gradually pitching cards to people with subprime credit, as we reported here.

If a double-dip recession takes hold, that could mean bad economic times ahead for millions more Americans. Unemployment, foreclosures and personal bankruptcies could rise, hurting many peoples’ finances and their credit scores.

Which means credit card issuers won’t be taking as many chances on people with less-than-perfect credit, Harzog says. People with high credit scores should still have no trouble getting cards.

But for people with subprime scores of 660 or below? Well, good luck.

“It’s going to get more difficult,” Harzog says. “The issuers will want to take less risk.”

Image: Steven Depolo, via Flickr.com