Consumer alert: sneaky credit card rate hikes

It would seem the eternal battle to screw the little guy by the big banks is going full steam. About to face new regulations that require them to allow you to pay off higher interest rate amounts first, they are sending notices that they are going to jump your rates on outstanding balances. I’ve seen some as high as 24.99% (thanks Sears, I can go to Best Buy).

You will get a notice asking if you want to accept the new rate- you can call and decline, when they will inform you that they will close the account (good). You are then locked in at the lower rate. If enough people do this, they’ll soon be scrambling to open new accounts again and offering deals. In the meantime, you’ve stopped them from changing your rate from hard to pay off to impossible to pay off.

Of course, Congress will play stupid on this for a while, as more people default, go into foreclosure etc. The only solution will be when the Fed decides to step in and force the banks that have accepted huge bailouts to be held accountable for their role in creating this cluster duck.

In the meantime, read all communications from banks very carefully. You’ve been warned.

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19 Responses

  1. Valerie November 22, 2009 / 6:40 pm
    >You will get a notice asking if you want to accept the new rate- you can call and decline, when they will inform you that they will close the account (good). You are then locked in at the lower rate.

    Here’s the problem with that. Once the account is closed, (a) your total available credit is reduced by that account’s limit; (b) your ratio of debt  to available credit for that particular card becomes a negative number (ie $500 balance versus $10,000 available credit, as opposed to $500 balance versus $0 credit , and (c) if it’s one of your oldest cards, the length of your credit history may be reduced. 

    If you decide to close the account, fine; but bear in mind this might negatively affect your credit score.

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  2. D. Greene November 22, 2009 / 8:27 pm
    Boy, it’s a good thing I don’t care about my credit rating anymore. I got a notice in the mail that citi was raising my mastercard’s APR to 16%. We’re talking about the same Citi that has received $billions$ of dollars in federal bailout money, money that comes from their customers in the form of taxes.
    How do they thank us taxpayers? By hiking our rates. I closed my account, and told the rep that I was very offended that after their own corporate mismanagement, incompetence, and malfeasance, I’m the one that has to pay to clean up after their mistakes, not once, but twice.
    I’m never opening another credit card, ever again.

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  3. Emily November 22, 2009 / 10:33 pm
    I just got one stating that my CC limit was being REDUCED to the exact amount that my husband & I just paid off over the past 5 months – on time I might add. 

    But I am sure that is just a co-winki-dink…

    So now it looks on paper that we have an almost “maxed out” CC.  Not because we were reckless with over-spending/charging in the past 3 years (we use only cash now – true foolishness of youth…) but b/c the CC cut the limit.

    Been with this CC company for almost 20 years.  I am sure it doesn’t have anything to do with the zip code where we live or the fact that I am self employed…Will kill the card when paid off.  They will lose a 20 year customer. 

    If you are self employeed or a small business owner let that sink in for a moment. Losing a 20 year customer.

    What is to say that CC won’t reduce our credit limit by the next $$$ that we pay off?

    NOTHING.

    CC companies are doing this bizzare behaviour all over the map.  My parents who pay their balance in FULL every month attempted to change from Travel Points to Regular Points and were told by the bank “We can do that but your rate will go from 4% to 29%” – just to change the type of points?

    Is it that much of a burden to the CC bottom line?   Travel vs. Regular points?  I am pretty sure that it is a drop-down menu, mouse click, and changed!

    Wait until final run-up to Feb 2010 when the CC Companies all have to comply with the new rules – gonna get weirder and more restricting.

    Go cash!

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  4. Allison November 22, 2009 / 10:58 pm
    I’m calling Chase tomorrow morning to politely decline their generous offer to change our rates on all 3 Chase cards we hold to variable rates. Lowe’s dropped our credit line to $300, while Home Depot increased our combined limit on 2 accounts to $14,000.  Bank of America raised our VISA (with a zero balance) to 19.-s0mething percent while another card with a small balance is holding at 2.99%. We have sterling credit scores and credit reports, There’s no rhyme or reason to this BS. I’ll take the hit to our scores, gladly.

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  5. In the 'burg November 23, 2009 / 8:04 am
    Try getting a credit card through a credit union if you can.  Because you’re a shareholder, they’re less likely to jerk you around.  Or at least mine hasn’t (so far).

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  6. Shane November 23, 2009 / 12:14 pm
    This isn’t extremely new as Chase started doing this crap over the summer.  I went from a 17.99 on a small “fun” card to 29.99 with no letter – they claimed since I was paperless it was emailed to me.  No email was ever received.  Card was canceled as soon as I got the first bill with the new rate.

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  7. Valerie November 23, 2009 / 6:24 pm
    I just want to point out that if your car or property insurance goes up, it may be because your credit score went down. A potential employer may look at your credit score before making a decision to hire you.  Your credit score may be the reason you’re paying $300 instead of $250 per month on your next auto purchase; or $600 instead of $400 on a home loan.  A low credit score might prevent you from buying a security system for your house, or it might convince a landlord to not rent to you.  It’s an unfortunate fact that your credit score directly affects your income and your budget in more ways than just qualifying for a credit card. The best you can do is keep that in mind when you make decisions that affect your credit history.  Having said that, I respect everyone’s decision to do what they believe is best for their own situation.
     
     

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  8. Gene November 23, 2009 / 6:59 pm
    But we gotta have our cells and macs and ride and out to dinners and ipods and designer jeans and theater tickets and HD TVs and Blue Rays and Club Memberships and vacations and………….

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  9. Emily November 23, 2009 / 10:13 pm
    @Gene

    Normally I would agree with you on this point – their are plenty who spend wildly without regard for the future.  I point and laugh at them. Often.

    HOWEVER my hubbie & I haven’t used this card (or the other one – we only have 2 CC – I know shocking!) in over 3 years.  We haven’t had a vacation in 7 years.  I drive a 10 year old car. 

    We needed a roof.  That was 5 years ago.  No other major expenditures. So this concept of everyone this happens to is a “spend-thrift” get over that idea.  Real quick!

    Keep in mind the CC companies are denying credit/reducing credit limits due to where you live and where you spend your money – data that is wholly flawed.  Careful, you might fall prey that flawed data.

    This is a whole new set of rules put in place by the CC companies.  They are racing toward a Feb 2010 due date set by the Feds for new CC rules that supposedly are consumer-friendly. 

    The following link is one example of what is going on:
    http://www.my3cents.com/showReview.cgi?id=39408

    Dead Dad – too bad.  AmEx will still cut your credit limit – they might even give you 30 days notice. If you have been ubber-ubber-good and stood on your head while rubbing your belly.

    Yes, I can’t wait until we are debt free and without CC debt.  Now, we pay cash for everything.  We will be debt free in 3 years.

    But it appears that we are being punished for paying down that debt (the amount reduced on the card was almost equal to the amount we have paid off).  Now b/c of the CC company “reduction”, we appear to have a “maxed out card” again. Bad for our credit rating.

    As stated earlier – what is to stop the CC company from doing it again?  NOTHING. 

    So what exactly is the incentive to pay off the debt?  I happen to HATE CC debt – so that is my initiative, but many others would chose to ignore this issue (blissfully-so I might add).  If the CC companies don’t want my business based upon errant data – where I live (housing price) and where I spend (how much can I afford – so shopping at Cubs and saving grocery $ is now a crime) – then SAY THAT IN WRITING – let me pay off the card without the ding on my credit.

    Don’t give me this horse sh$t of too much revolving credit or debt to credit ratio etc.  Be honest with me as I have been with you.  Simple give and take of business.

    At what point does one get ahead of the 8 ball by doing the right thing?  I certainly am NOT someone to file for BK and refuse debt that I knowingly accumulated, but nonetheless debt that I am also making a concerted and honest effort to pay off? 

    The CC Companies make it a moving target.

    Gene you might eat your words on this issue…or at the very least your credit rating.

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  10. Robert Vigh November 24, 2009 / 3:55 pm
    You should be able to write the credit bureaus and have them place explanations of actions on your credit ratings. Also, as someone mentioned above, credit unions are friendlier places to do business.
    But really these are borrowing contracts that each person entered into with the express agreement that they could change the terms. I encourage everyone to shop around for the card that suites them best.
    Also, for anyone in need of some extra $$. Check out prosper.com. It is a really cool peer to peer lending site……………However, if you are in Ohio, you cannot sign up to be a lender for some reason. It was were I was going to put some of my extra savings.
    From a Vendors point of view, I wish Amex would go out of business. They charge the merchant the highest rate of everyone. I am on the precipice of no longer accepting it. Also, since most credit card companies charge the merchant anywhere from 1.5-4% of the transaction, deal with small businesses and ask them if they offer a cash discount. Most small business people hate paying that fee to a credit card company.

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  11. David Lauri November 24, 2009 / 7:45 pm
    Businesses lucky enough to have a product people really, really want don’t have to play with the credit card companies.  Marion’s Piazza doesn’t pay Amex or MasterCard or Visa or Discover a dime in transaction fees. On top of that, they earn money on the transaction fees their customers pay when getting cash at the ATMs in their restaurants.
     
    And I love my Charles Schwab high yield checking account because I can get cash from any ATM in the country without having to worry about whether there are ATM fees or how much such fees are because Schwab refunds all the fees to me each month.  Woohoo!

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  12. Gene November 24, 2009 / 8:47 pm
    Marions loses business bc of not taking credit cards. A lot of business.

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  13. David Lauri November 24, 2009 / 9:48 pm
    And yet I bet they’re also wildly profitable.

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  14. Gene November 24, 2009 / 11:24 pm
    Certainly they do well…. but they would do better if the accepted credit cards. I like the fact they don’t take credit cards. But they would make more money if they did. This is why 90+ % of retail/restaurants accept them…… it is not rocket surgery or brain science….lol……..

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  15. David Lauri November 25, 2009 / 6:12 pm
    But they would make more money if they did.
     
    Then why are businesses that do accept credit cards whining about the fees they have to pay to credit card companies?

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  16. Gene November 25, 2009 / 6:38 pm
    BC most business owners see it going out….. not necessarily coming in. You know this.

    The “hell with it, put it on the CCard” attitude would go away then. Trust me on this…… Happy Turkey Stuffing……

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  17. Robert Vigh November 26, 2009 / 12:07 pm
    David,
    Credit cards serve their purpose and for small transactions they are convenient accounting tool. Their must be a rate that is paid, but it ranges from 1-4%. 1-2 I dont mind, it might be close to my accounting costs. 4% is alot. Furthermore, vendors cannot tell ahead of time what they are going to be charged. Their is no way that I am aware of to differentiate between a 1% visa and 3.5% visa.
    Its not that big a deal, but consider if you are selling a 3K dollar piece of equipment. There is $90.00 going to the bank for processing that. I sell some high dollar items with small margins, so maybe I just pay more attention to it, but I always offer discounts for certified checks. I would rather my customer save that money than me charge them to cover the bank transaction.

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  18. Beth December 1, 2009 / 2:40 pm
    For almost 25 years I paid off my cards each month – didn’t want to pay the interest. Unfortunately, I dated a narcassistic, sociopathic con-man who tricked me out of a lot of money and then ran up my credit cards for “business reasons.” Businesses that failed miserably! I got rid of him but have about $30,000 in credit card debt because of it all (plus he owes me a lot more money than that). I almost went bankrupt a year ago, but I borrowed some money from family, used tax refund money, sold posessions and somehow raised my credit score up 50 points. I’m also working 3 jobs.

    Now the credit card companies are upping their fees. I can’t handle it anymore. I may lose my home (I make too much money they say to qualify for Chapter 7). The bankruptcy attorney said he’s NEVER seen a situation as bad as mine – he called it “surreal” and “The Twilight Zone.” In Chapter 13, I’m supposed to pay 70% of the debts, but I can only afford around 10% – which he thinks the judge won’t go for.  

    My ex-boyfriend doesn’t have any money – I think he somehow has “negative” money in the bank (yes, sadly that’s possible! And you get charged a fee for having less than no money!)

    Guilty of overspending? No – guilty of being conned by someone I loved, yes. I guess I’ll be paying for that mistake for years. I hate to say it, but bankruptcy may be my only choice. I have always thought it dishonorable to file bankruptcy – but how can I keep making payments if the credit card companies want to play dirty with us?

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