Credit Card Cos. Changing Terms of Agreements

[trayfoot]

Have any of you gotten letters from credit companies changing your "terms of agreement" - which essentially means they are raising your interest rate to exorbitant numbers? I got one yesterday from Capital One - changes my rate from 6.9 to 15.9 for purchases and much higher (24/25) for cash advances, etc.. I have a stellar credit rating and have always paid off my credit card - which they admitted when I called them. But, they said, "Because of the bad economy, we felt this was just a good business decision." Of course, I told them where they could stick their "business decision".

Is this a trend? And, when you close your account because of these higher interest rates, does it affect your credit rating? Any info would be greatly appreciated.

[ejpoeta]

1. i believe closing accounts does affect your credit rating.

but, i am not sure how much it affects your credit rating. i believe it has to do with how much credit you have available or something like that. I think these people are idiots, because the people that pay their bills on time every month will cancel their cards and they will be left with people with not so great credit.

[Christian30]

2. Ibelieve

that closing cards only affects your rating if you close it with a balance. If you don't have a balance, it shouldn't affect you.

[ejpoeta]

7. here is an answer from PBS

I searched and found a few answers similar to this one. This is taken from NOW on PBS: Expert advice on Credit Cards http://www.pbs.org/now/shows/501/credit-card-questions.html

Question: I have a Visa credit card, and I have a zero dollar balance on the card. Last week I opened my statement to find a notice that the membership fee would be raised from $25 a year to $88. I wrote a letter stating that I wanted the membership fee waived or reduced. If Visa ignores my request, how will it hurt my FICO score if I cancel the card?

MT: Good for you for reading your bill so carefully, many people do not. Whether or not your FICO score is impacted will depend entirely upon how old this account is. If this is your oldest credit card, canceling it could (temporarily) knock 20-30 points off your FICO score (because it shortens the length of your credit history). If it is not your oldest card, the impact will be slim to none. $88 is awfully high for an annual fee—unless you are getting some incredible credit card "perks" in return. So long as you have at least one other credit card that you can use (ideally one that has been around for a while) you will be just fine. Additionally, unless you are within six months of making a major purchase like a new home or car—a slight, temporary dip in your credit score as a result of closing a long-standing credit card with a sky-high annual fee won't materially impact your financial life.

[ima_sinnic]

3. when you close credit card accounts it affects your credit rating because

it gives you less available credit, and it can shorten the length of your credit history if you have had that card longer than any other credit account. Also, if it is your only credit card, i.e., your only "revolving" account, it can lower your score by reducing the diversity of your types of credit.

[Dr.Phool]

11. When this whole thing is finished blowing up,

Nobody is going to have any credit anyway.

[hobbit709]

4. They're cutting their own throats

The people who have low or no balances won't use the card so they can't make any money off them. The people with high balances will sooner or later just say fuck it and walk away. That's what I did ten years ago when I got into trouble with my cards. They lowered my limit to less than my balance, then started charging overlimit fees up the wazoo. When I realized that I couldn't catch up no matter what I did, I just walked away from it. In TX unsecured debt is worth the paper it's written on.

[dipsydoodle]

5. Another issue

is the where they are crafty enough to credit payments made against purchases before they credit against cash advances. As a result until a card is fully paid off they persist in charging all cash advances without reducing that balance.

Bastards.

[democrattotheend]

12. I got screwed by that recently

I bought a new MacBook and applied for the Apple credit card with 6 months interest free to pay it off so that I could space out the payments instead of having it feel like such a big bite. But then I stupidly used the credit card for other purchases, since I wanted more iTunes points, not realizing that the other purchases were not interest-free and that any payments I made would be applied to the computer before the other purchases. Fortunately I figured it out before the statement closing date and had the cash to pay off the computer and the other purchases before a finance charge could go into effect, but I really had to read the terms carefully and then call for clarification to figure it out...they definitely wanted me to believe it was all interest-free. I was annoyed, but I'm lucky that I figured it out and was able to pay the whole thing off...at least now my computer is paid for. Still, I didn't like that the terms seemed designed to either deceive or at least not make it easy to figure out.

[pipi_k]

24. Bastards is right!!!!

That is what Barclay Bank did.

They also raised the interest rate on the cash advance to almost twice what they agreed to when we first got it, although the interest rate on charges remained the same.

Like others with good credit, we always made payments on time.

Mr Pip called and told them we wanted the original interest rate back on the cash advance. They said "no". We said "goodbye" and transferred the entire balance to another card.

Oh, and another thing they did...I was the main user of that card for like nine years...always paid on time, and usually always in full except for once a year after Christmas, but it only took two months to pay the balance off. I used that card for years at places like Netflix and Paypal, etc. Just before we closed the card out, something strange started happening. Places that did automatic billing, like Netflix, were sending notice that there was a problem with the credit card.

Mr Pip calls and gets some guy in India who says that he (Mr Pip) needs to authorize me as a valid user. This happened three times despite Mr Pip telling these people that I had been using the card for nine fucking years with no problem. Now I need my husband's "permission" to use it???

WTF????

So those two things caused us to tell Barclay Bank to piss off.

[Green Mountain Dem]

6. If there are no annual fees...

why close the acct...just don't use it. Closing your account will lower your credit score for no good reason. I have received a few of those letters and will keep the cards, all with a zero balance, and let them spend their money to administer it.

[trayfoot]

8. I thought about that........

after I blew my stack and closed the account. I was furious with the letter AND with the attitude when I called.

[lunatica]

9. They only spend our money to administer the accounts

I'm not being critical of what you do at all. I plan to do the same thing when I pay off all my cards, but lately the credit card companies have been charging way too much for 'service fees' every single month. They're adding on that 'service fee' every month and it's higher than the minimum payment is, basically doubling the amount I have to pay every month.

So the credit card companies aren't spending their own money at all. They get the profit but we pay their bill. A lot like the banks getting the bailout. They get our money to then charge us for loaning it back to us. That's if they don't pocket it and just fuck us in 'gratitude' for getting our money. Slam bang thank you m'am.

[democrattotheend]

13. Is the service fee for carrying a balance?

I've never heard of a service fee on credit cards...banks sometimes have them if you go below a minimum balance, but I've never heard of a service fee on a credit card. Do you have to pay a service fee even if you pay your balance in full every month? If so, you should find a different credit card.

[lunatica]

17. They don't say

My credit card has a balance on it, but I pay more every month for the service fee than they charge for my minimum payment. If I could pay off my balance every month then why would I bother having a credit card? For that credit rating? See, it's a deceptive bubble. Why do they need to charge me interest and a service fee? The answer is they do it because they can, not because it's good business. It's legalized usury.

[Dr.Phool]

10. I got one from Chase yesterday.

I got raised from prime to prime+4.99 "to maintain the profitability of my account".

I've had the account for 13 years, never been late or over. It has a 17k credit limit. I know it's not much, but prime is now 3.25%, this now puts me at 8.5%, so they're damn near tripling the interest rate on a good customer. I don't think so.

I have 2 other Chase accounts with zero balances. I'm canceling all three accounts. Fuck them and the credit score.

[lunatica]

14. Usury under any other name is still usury.

I'm getting to think the same way. Fuck the credit score. Especially when it's a losing proposition to keep the credit score up. They love to threaten everyone with that Almighty credit rating crap. It's as false as all the other bubbles and is probably in the process of bursting as we speak.

[pipi_k]

25. Oh shit...

One of my cards is with Chase.

I suppose I'll be getting a notice soon, too.

[windbreeze]

29. you think that's bad???

I have excellent credit...got one from that same bank yesterday...mine went from prime to prime + 12.99....yeah...get that...had this account for so many years I can't even remember when I got it, never missed a payment, even the month I didn't receive a bill, OR been late...but....to hell with it...it's gone...I could care less what they charge...IF I don't have an account...they can't charge me...end of story...let's face it people...credit is NOT going to be a viable option for anyone in the near future, so it's easier to get rid of those cards now, one less worry...wb

[dkf]

15. Some of the ways they calculate the FICO score are ridiculous.

I hope they take a look at it and realize exactly who is being responsible and who isn't.

[uponit7771]

16. YES!! I worked for a Credit Reporting Agency (Equifax) and if you have a balance on

...your cards and you close an account the you're credit to balance ratios get screwed and so will your interest rates..

[lunatica]

18. I closed my accounts AFTER I paid them off yet my interest rates have increased

So it doesn't matter whether you have a balance or not. An example is that one credit card company, like Bank of America, owns other credit card companies, like WAMU. If you close one of those accounts the parent company just raises your interest rate and charges you service fees on the other.

[uponit7771]

20. Yeap, closing accounts overall is a bad thing and getting a CC should be thought through

[windbreeze]

27. so what you are saying

is that you are damned if you do, and damned if you don't...!!and in that case, I have to err on my own side...f*** the cc companies...wb

[flpoljunkie]

19. Here's a recent USAToday article, links on credit card reform and recent credit card fee increases

Credit card reform gets another look

By Kathy Chu, USA TODAY

As credit card fee increases squeeze more consumers, lawmakers are stepping up efforts to reform criticized practices.

In the latest round of fees, Capital One (COF), Citibank (C) and HSBC are raising interest rates for millions of credit card borrowers. Chase (JPM) is tacking on a $120-a-year fee and raising the minimum payment from 2% to 5% of the balance for hundreds of thousands of consumers with low interest rates. The actions come as unemployment rises and more consumers struggle to pay their bills.

READ OUR SERIES: Changing credit card terms squeeze consumers

http://www.usatoday.com/money/perfi/credit/2008-12-15-credit-card-consumer-squeeze_N.htm?loc=interstitialskip

In a hearing Thursday, some lawmakers said the moves were angering consumers and Congress alike — and giving reason for an immediate crackdown on credit card practices.

"Consumers are trapped in a business model that is designed to induce mistakes and jack up fees," said Sen. Charles Schumer, D-N.Y. "This type of tripwire pricing is predatory and must end."

In December, the Federal Reserve and other regulators released a rule reforming some of the most controversial practices, such as raising rates on existing debt. But that doesn't take effect until mid-2010. Advocates say that's too late for struggling consumers. "We're all going through an economic crisis right now, and we need reforms that will help consumers now," says Bill Hardekopf, CEO of LowCards.com.

Yet imposing restrictions sooner may "send further chills in a market already in deep freeze," says Ken Clayton of the American Bankers Association.

http://www.usatoday.com/money/perfi/credit/2009-02-16-credit-card-reform_N.htm

[dkf]

21. If you always pay your credit card off, aren't you basically using

their money for free and aren't you costing them money to maintain your account?

Then why should you care if they raise your rate? 20% on 0 is still 0. Heck 100% on 0 is still 0.

Maybe they are happy you are closing your account since you are just an outlay and make no profit for them.

[Dr.Phool]

22. No they're not happy.

Even if you pay them off monthly, they're still raping the merchant on fees on that end. I used to own a restaurant. I know.

[dkf]

23. I thought Mastercard or Visa got that fee..

Do the banks split it?

[windbreeze]

26. Yes.....and Yes.....Closing your credit account does

affect your credit rating...the question is...do you care?? I don't....and yes, I received such a notice from one just yesterday...about rates...sooooo....when I have this one paid off here in a month...I will tell them to take a hike...who's fault is it that these banks made bad loans...??? it sure isn't mine...and they didn't make one to me...however, I do have to say in all fairness...that the rates they intend to charge from here on out...are not any higher than any of the rest of them have been charging all along...wb

[DianeK]

28. closing out a credit card can only hurt your fico rating..

cut the card up but don't close out the account. FICO is all about credit/debt ratio so if you close down a credit card you are lessening the credit side of that ratio and your rating drops

[pipi_k]

30. On closing an account vs cutting up the card and not using the account...

Mr Pip had a card through Chase Bank that he didn't use at all for a while because he has two others. Chase contacted him and said that THEY were going to close his account due to non-usage for a certain period of time. He said "go ahead" and they did, and I'm not sure that was the best thing, but whatever.

I've just decided that if Chase raises the interest level (or does anything else marginally sleazy) I won't cancel the card and I won't stop using it. No...I'll use it to make a ten dollar or less purchase each month. What are they going to do...drop my credit limit to nine dollars?

Fuck 'em. They'll probably be paying someone in the office more to process the charges and payments than I'll be charging on it. Oh, not to mention the postage, which isn't all that much, but still...

These big banks think they can screw with the people?


I think not.