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NORTH ATTLEBORO - Martha Petersen thought she was a model credit card customer, minding her budget carefully and faithfully making each monthly payment.

Although her electrician husband has lost thousands of dollars in overtime as a result of the housing crisis and the family has struggled with medical bills from a child's illness, Petersen said she was able to to come up with the $340 monthly minimum payment on her Chase Master Card.

Then just last month, she received a notice from the bank saying that her minimum was being raised from 2 percent to 5 percent of her balance, ballooning her monthly payment to $850.

Petersen says she can't afford the new minimum and wonders what she'll do when the next bill with the higher charge arrives.

"We've always paid our bills, and a default would ruin our credit," Petersen said, noting she initially transferred balances from other accounts onto her Master Card to take advantage of a low, 3.9 percentage interest rate. Now she's not so sure the "bargain" rate was a bargain.

"I see this as something that could push us and other people like us over the edge," she said.

Petersen isn't the only local consumer who feels they've fallen into a credit trap not of their own making.

A friend, Ann Marie Bagley, said that despite the recession, she and her husband were making a go of the temporary staffing agency they founded six years ago - until two separate lenders clamped down on their credit lines last month.

Two banks closed some of the couple's accounts and drastically reduced their credit lines to the tune of about $64,000.

Lacking sufficient credit lines to operate their day-to-day business, the Bagleys have virtually shut down.

Bagley said their agency has been profitable every year since its founding in 2003.

She said she and her husband had excellent credit and haven't missed any payments. Now, she fears that the actions taken by the banks will not only put them out of business but drastically affect their credit ratings, making it difficult for them to get credit elsewhere.

"It just seems like the American Dream is crumbling around us," she said.

In the meantime, Bagley's husband has gone back to school to earn a real estate license in hopes of a rebound in the housing industry. For the moment, the couple is living off of what remains of Bagley's 401 K and fees she earns as a consultant. With credit card delinquencies mounting, credit card companies are under increasing pressure to recoup their losses by increasing rates and cutting their exposure to borrowers they consider questionable or unprofitable.

JP Morgan Chase, the country's largest credit-card issuer, announced plans last month to raise the minimum payment for some customers to 5 percent, ahead of the effective date of a federal law that would make such practices illegal.

Customers who pay less than the minimum may be charged extra fees, according to Bloomberg.com. The news service quoted a Chase source as saying that the change would affect fewer than 1 percent of its customers.

The source did not list a rationale for selecting which customers would be subject to the new minimums.

JP Morgan Chase did not respond to a request for comment by The Sun Chronicle.

Across the country, many credit card issuers raised interest and tightened rules affecting consumers in the aftermath of the banking crisis that shook the foundations of the U.S. economy.

The change comes in advance of the Credit Card Accountability Responsibility and Disclosure Act. It takes effect Aug. 20, and requires 45 days notice of rate increases or other major changes in consumers' accounts. It also restricts the amount a customer's minimum payment can be increased.

Card issuers and some conservative critics have criticized the new law and said the legislation would push up costs and fees and force banks to cut back on the availability of credit.

Some experts detect more than a little hubris in the credit card industry's protests, however.

"It's outrageous that the credit card companies have the lowest cost of capital, federal protections and access to TARP funds and seem to be hitting customers harder than ever," said Professor Robert Manning of the Rochester Insitute of Technology.

Manning, a nationally recognized expert on consumer credit, authored the 2000 book "Credit Card Nation" railing against consumer dependence on plastic.

Manning says that despite the federal government's moves to keep credit flowing, banks and credit card issuers are taking a defensive posture to guard against future losses. A customer's credit worthiness isn't necessarily part of the computation.

"They want to show stockholders that they're doing something proactive," he said. "Basically, they'd rather cut off 10 good customers to get to one bad one who might not be able to pay."

Increasingly sophisticated data mining methods that can track customers' purchases have also fed into lenders' decisions about to whom to extend credit, Manning says. Even a sudden spree at WalMart by a customer whose normal buying habits are more upscale could be a red flag, he explained.

Manning, who has called for more rational methods of measuring customers' credit performance, says that under current conditions there are bound to be innocent bystanders.

Those who are caught in the credit card vise may find the issue frustrating, but there are ways of getting relief from credit card issuers.

Many companies are quietly negotiating with their customers in need of relief in hopes of recovering at least part of what they are owed.

This year Bank of Americia expects to issue 1.2 million credit card modifications, up 20 percent fom 2008. Chase told the Associated Press it recently expanded eligibility for its repayment program to those in the earlier stages of delinquency.

While not everyone who seeks relief from credit card companies qualifies, experts say it's possible to make an effective case based on your budget and need.

"If you demonstrate that you only have so much left over after covering your expenses, that gives you some ammunition to present a case," said Ben Woolsey, director of consumer research at CreditCards.com.

Generally, a consumer needs to show that he or she can't keep up with payments for very long based on their existing circumstances.

Among factors a lender will consider in deciding whether to grant a modification are a customer's income, payment history, size of balance and any other debts and assets. A recent job loss or other finencial emergency could be another reason for requesting leniency.

The Associated Press contributed to this report.