Personal Finance and Investing

You’ve always played by the rules. You dutifully pay on your credit card each and every month, and are proud to say you’ve never missed a payment or a due date.

So, why in the world have you just noticed that your credit card’s interest rate is set to go through the roof?

Unfortunately, many banks are not being particularly choosy with whom they raise rates and introduce fees. Take Bank of America, for example: this creditor has plans to implement an annual fee to millions of its customers, ranging anywhere from $29 to $99.

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Even in an uncertain economy BankTexas CEO Troy Robinson feels comfortable making loans to small business owners.

BankTexas CEO Troy Robinson says he won’t take part in the government’s new program offering cheap money to community banks. (Courtesy Troy Robinson/ABC News Photo Illustration)

That’s mainly because Robinson knows his customers. BankTexas is headquartered in Quitman, Texas. Population: 2,000.

When the Obama administration announced last month that the Treasury Department had proposed earmarking billions of dollars of Troubled Asset Relief Program funds for “community banks,” small, locally run institutions such as BankTexas, the initiative seemed sensible enough to Robinson.

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Knowing what your credit report says is an important issue that not very many people take seriously. Perhaps this is due to a lack of awareness, but it is important to stay up to date. Knowing what it says is so important that the government requires reporting companies to give you an annual report for free. Ever heard of identity theft? A big reason why so many identity thieves commit their crimes undetected is because most people never check theirs. If someone takes out multiple loans in your name you may not find out about it until you have been bled dry and the thief is long gone.

An identity thief will sometimes use a person’s identity for a period of up to 6 months or more, switching back and forth between different victims.

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Many consumers, worried about an overabundance of credit card debt and rising interest rates, have chosen to take matters into their own hands and cut up their credit cards, once and for all.

But is this really the best decision, both for yourself and your credit score?

The first thing you need to know is that your ability to borrow virtually any kind of money is dependent upon a strong credit score, especially in today’s economy. It is because of this that cutting up your credit cards, although a seemingly smart idea, may really be detrimental to your credit score.

For example, cutting up your credit cards and canceling your accounts immediately affects your FICO score, as your available credit is now much lower.

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