What Happens When Your Issuer Dumps Your Credit Card?

With banks going out of business left, right and centre this year

, you could find yourself dealing with a new creditor. When your debt changes hands, thanks to credit card portfolio sales, this article will help you deal with the new card issuer.

Those in charge of credit card debt during a recession are increasingly keen on selling the debt, ad this means that cardholders are left with no choice but to let their debt pass hands. When this happens cardholders tend to start to feel nervous - What if the terms of the debt change? What if the APR changes? Will reward points still be available?

Reassuringly, the terms of most credit card accounts change only minimally, in a wat that should be barely noticeable to the cardholder, although this doesn't stop those in debt from worrying about being asked for inflated payments and suffering higher interest rates.

In most events, the cards continue to be usable, and the acquiring bank tend to honour the contracts agreed by the failed bank. The new debt owner will map the terms of the acquired credit card with their existing terms, comparing fees, and charges. Unless there is a vast discrepancy between the two sets of terms and conditions, it is in everyone's interest for things to remain as they are. Sometimes any changes made can even work out even better for cardholders.

When banks fail, and many did this year, their assets are seized by banking regulators and sold as rapidly as possible to other financial institutions. When small banks fail, it is a relatively minor issue. But when big banks fail, it can have lasting effects on the entire economy.

Ultimately it depends on the quality of the credit card which has already been issued, and whether those terms are workable under a variety of different organisations. While many of us were used to credit on tap a few years ago, the less prestigious credit cards with higher interest rates are likely to be the ones changing hands.

Sometimes charges will be added, interest rates will surge, and cardholders can be left very unhappy indeed by the balance of their debt changing hands. Unfortunately there is little the account holder can do, and the best way to avoid paying inflated charges and interest is to pay off the debt with a different credit source. Sources of credit are hard to come by during a recession, so debts changing hands can be disastrous for cardholders.

by: john mce

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