Punctual Payers Are Rewarded by Credit Card Companies With Higher Rates

[Purveyor]

By Alexis Leondis

Feb. 13 (Bloomberg) -- Mel Brandt said he got a Citibank Home Depot MasterCard for its rewards program. His reward for paying on time was an interest rate increase to 19 percent from 12 percent.

“If I didn’t opt out and close the account, I’m afraid the interest payments would snowball and I would default,” said Brandt, 52, a self-employed house painter in St. Louis, who relies on credit cards to fund his painting business.

Lenders came under fire yesterday in a U.S. Senate Banking Committee hearing for raising interest rates, adding fees and cutting credit lines, even for consumers perceived to be low- risk with high credit scores. Connecticut Democrat Christopher Dodd, the chairman, called the practices “gouging.”

The federal funds rate, or the interest rate banks charge each other for overnight loans, is as low as zero and U.S. lawmakers have agreed to a $787 billion economic stimulus plan funded by taxpayers.

Rates for consumers should be falling faster than they are, said Ben Woolsey, director of marketing and consumer research at CreditCards.com, an online resource for credit-card users. Banks, facing an increase in defaults and a decline in consumer spending, are “still very reluctant to pass lower rates or increased credit access to consumers,” said Woolsey.

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[Kookaburra]

1. Yep -- happened to me.

Not only did they increase my interest rate, but they also decreased my credit limit. I've always paid on time, and when there was a balance carried, it was never very high. Nice reward, eh?

[elocs]

2. I finally got nailed by Capital One where my interest rate had gone from 7.75%

to 6.67%, and yesterday I got the notice that it would be the prime plus 10%. I've always have paid on time also.

[pipi_k]

3. I don't know what they think they're going to accomplish

by pissing people off.

People are pissed off enough as it is.


Anyway, there's another thread around here someplace where people have said "screw you" to the banks and are now doing business (or have done business for many years) with local credit unions.

Banks that keep pulling this shit are going to end up going down the tubes, and deservedly so. Then I hope NOTHING saves them from their own disgusting greed.

[Warpy]

4. I warned everybody months ago that rates would rise

across the board, monthly minimum payments would increase, and that limits would be reduced and set into stone.

This is just the beginning. The banks are desperate for assets. If you carry a balance, pay that puppy off fast!

[snappyturtle]

5. I loved it last week during the House Finance Committee hearings

when the Chairman/CEO(?) of Citigroup said they had 'helped' consumers.....with that buy out option! It's like we're giving you fair warning to future excessive interest rates unless you 'opt out', pay in full. For many people who are struggling just to make the payments on time, that isn't 'help'. We have one credit card we owe plenty on. Unfortunately we went through some terrible times, mostly medical, and the card had to be used and because we had such a good credit rating we had a high credit limit. Although we have never missed a payment, always paid more than the minimum and on time, we got that opt out notice and I take it as a threat. At one time, I contacted this cc company and asked them to reduce the credit line because we didn't want the unsecured credit....to no avail. I will be so glad when it is paid off and thankfully we have work but I know it's going to cost much more.

[TripleKatPad]

6. Mine went up to 19% too

The same reward for paying off my bill in full each month.
I've adopted the habit of subtracting each CC charge from my checking account as it is incurred. Treat it sort of like a debit card.

[dflprincess]

7. Citibank tried jumping my interest as well

when I called to complain, I was greeted by a recorded announcement that said I could transfer my "high interest" card balances to my Citibank card and get 0%. When I finally got through to a human I told them I wanted to look into the 0% offer. They were not amused when the found out the high interest card I wanted 0% on was my Citibank card. I went through a couple levels of people before I got to someone who agreed to drop the rate back to 9 something. But I wasn't told I had an opt out option. (Not a big deal I guess as I'll have it paid off before a year goes by).