Credit Card Cos. Changing Terms of Agreement to Higher Rates

[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.

[boobooday]

1. We got one as well, from Citi

I am outraged.

Where did consumer spending go? Ask these guys. How much do they suck out of the economy with their usury?

8 point hike.

[HillbillyBob]

2. That is a good question. I would try to contact the ratings agency

and tell them you want to put a notice on your report that YOU closed the account not the credit card company and why and if they won't contact a finance/credit specialist or attorney .Let us know ..I personally do not have credit cards..Im too poor and live on SSD and make too little to qualify for any credit at all.

[mwooldri]

9. If a CC Co sends you a notice of a rate hike and you have an opt out...

... and you use it and the account gets closed, the CC Co WILL report the account as closed by the consumer, not by the lender. Only if you're late on payments and they close the account for delinquent payments do they mark it as closed by lender. This designation can change, so if you know you're going to run into money difficulties and you close the account, and then 3-4 months down the line the CC Co realises that they aren't getting paid, they'll report it as "in collections".

[MadHound]

3. No, I didn't get such a letter

Then again, I don't have a credit card, and thus don't have to worry about that sort of thing. I suggest that you and everybody else pay off their debts and cut up their cards. I've lived my whole live without a card and my life has been better because of it. A great credit score, don't have to worry about the whims of the card holder, better budgeting of my money.

Cut up those plastic shackles.

[Zywiec]

5. How can you live without a credit card?

How do you rent a car without a credit card?

How do you make a hotel reservation without a credit card?

How do you buy an airline ticket without a credit card?

I believe the trick is not to carry a huge balance on your credit cards!

[BlooInBloo]

8. My debit card works fine for all of those.

[mwooldri]

13. Hotels, Airlines - yes, debit card works just fine.

Car rentals? you got to be careful.

Plus car rental companies like placing holds on credit cards... if it's a debit card then they're holding up $X in your checking account, that money is then no longer available to you. Also a lot of credit cards offer their holders some form of car rental insurance so that's an extra protection that you don't get with a debit card.

That is if they accept the debit card in the first place.

The by far best way to use a credit card is for those big ticket items, and for you to already have the money stashed away in the bank. Use the credit card to make the purchase. Then pay it off when you get the bill and are satisfied with the goods received (if you can). Credit cards offer you protection that debit cards generally do not. When airlines go bankrupt and cease operations, credit card customers tend to get their money back, less so the debit card customers. You get the protection of the Fair Credit Billing Act - you can dispute a credit item for nearly any reason and if you've been billed for the transaction, you do not pay for it until the billing investigation is complete. If it's not in your favour the CC Co may well charge you interest but that depends on the CC Co. Debit card customers don't have this available to them... sure Visa/MC will cover for fraud transactions but certainly not for things like checking into a hotel and finding the room completely unacceptable to the point you can't stay there, checking out and going nearby but that original hotel bills you anyway... you can fight that with a credit card far easier than with a debit card.

Sometimes credit cards are useful for the rewards programs but then again you have to be disciplined and pay off your account in full each month.

Mark.

[MadHound]

15. Have no problem with car rentals either

Enterprise takes my debit card just fine. Yes, they put a large hold on my account, which disappears when I return the vehicle, immediately.

As far as the rest goes, I get just as good protection when I purchase with cash as I do with a card. If something isn't right about a purchase, I return it to the store and they take care of it, usually pretty quick.

If I pay with cash or check, I don't have to worry about false billings.

Sorry, but I really have never seen the upside to a card.

[billyoc]

17. Does it really? I've had problems renting cars with debit cards.

:shrug:

[BlooInBloo]

18. I haven't.

[MadHound]

19. Try Enterprise

Yes, they'll put a hold on your account until you return the car, but other than that, no problem.

[billyoc]

20. Oh, thanks, I didn't know that. How much do they hold?

Are you able to use the debit card for other things while you have the car?

[MadHound]

22. I think that it depends on the amount of the car

They only hold a few hundred dollars, I think that's the deductible on their insurance, and if you have more than that in your account, sure, you can still use your debit card. They'll tell you all this up front.

[MadHound]

12. I either use a debit card or pay cash

I've had no problem doing any of those things you mentioned with a debit card. Believe it or not, but people lived quite well without CC's up until about fifteen years ago. It was only about ten years ago that credit cards started becoming ubiquitous and people started paying for everything from their morning cup of coffee to their groceries with a credit card. Twenty-thirty years ago, if you pulled out your credit card for your groceries people thought that you were probably in dire financial straits. If you pulled it out to pay for your coffee, the person behind the counter would laugh at you and point to the "no credit card" sign.

It's really only in the past ten that credit cards have become a "necessity." False meme's like it's safer(hmm, except for that ever increasing chance of credit card fraud, and oh, yeah, some mugger ripping you off), more convenient (except for that time spent at the end of every month going through the monthly charges), quicker (speed, speed is king, we must shave off another fifteen-twenty seconds off our lives:eyes:) were promulgated throughout society, and look what happened. We've got a looming crisis in credit due to people putting their entire lives on the card, and waaaaay overspending on it to boot.

What I find most amusing are people who complain and complain about rising rates, more ticky-tacky fees and such, yet if you suggest that life would be better without the card, they get this horrified look on their face, like I just suggested they cut off their right arm or such.

Yet the benefits of living without credit cards are many and obvious. Like I mentioned earlier, my credit score is great, I stay within budget, I don't have to worry about fees and such, and overall, my life has been better because I never got a card. Try it sometime, cut up the cards, you'll never go back.

[eilen]

4. I just got one from Citbank/Sears

I'm closing the account. It is almost never used.

If you don't have a balance on the card, it should not be a negative. I think it depends on how much credit card debt you have because they do look at the debt: credit available ratio.

This is a trend of credit card issuers.

I have decided that at this point in my life-- we own our home, only drive used cars, we don't carry balances on credit cards-- that I don't care too much about the credit rating. If we wanted to refinance, it would be a concern.

[radfringe]

6. they are creating a bigger hole for themselves

people are on the edge, and the edge keeps getting smaller which results in more people falling off the edge.

the higher they raise the rates the more difficult (if not impossible) it is to make even the minimum

to make up for the new "delinquencies" they raise the rates and that creates even more delinquent accounts.

what happens when the majority of their customers go delinquent? Will they go hat in hand for more TARP money and blow it on bonuses?

These are tough times, and we are asked to sacrifice - where's the credit card companies' sacrifices?

If they were smart - they would be looking down the road, they would be looking to change their image from greedy money-grubbing blood suckers to something more akin to a partner in sharing the sacrifice. Please note - I said IF THEY WERE SMART

Good will and a positive image go a long long way in the profitability factor. They could send out letters sayings something to the effect of "We know the economy is pressuring everyone and we want to do our part to help get things moving. In the spirit of shared sacrifice we are LOWERING your interest rate...."

Now - look ahead down the road in 3 or 4 years, the economy is doing a better, your financial situation is better. When you go to use a credit card will you use the one that RAISED your rates and gouged or will you us the card that LOWERED your rates and helped you in tough times?

[mwooldri]

7. If your Cap One acct is fee free then...

... if you can pay it to $0.00, use it only when you know you can pay it off in full, and keep it open.

Closing accounts can affect your credit score negatively. The FICO model works on % of available credit (the more you have available the better), and length of account history. Given today's credit market, I'd recommend hanging on to any available credit you have, keep the account active, but if you can afford not to carry a balance, then don't do so.

Yes, it's a trend. I work for a CC Co and yes we jacked the rates up, but not by anywhere near as much as what Cap One has done (mine went up about as much as yours did... my wife's strangely didn't but she got a notice stating her default rate is going up). It's across the board. Citi are hiking rates, B of A are hiking rates. Chase are doing something even weirder... if you took advantage of a nice balance transfer special at a fixed-for-life low rate, they are now imposing an annual fee on the account of something like $120... or you can elect to have an interest rate increase. Discover seem to be going the other way and aren't being as aggressive as the other bigger major CC Cos in hiking their rates and slashing available credit. American Express have been in the press a fair bit because of spending limits being enforced on customers who were used to an account without a set spending limit.

The problem is because CC Cos were funding their operations not through regular bank deposits but through the commercial lending markets... they would borrow money at 2-3% and then lend to you at 9-12%. Commercial lending rates went up quite dramatically, so instead of that nice 2-3% they had to borrow at 7-9% ... but the Fed decreased its rates... trouble is that credit card companies base the rate they provide to their lenders on the Feds' Prime Rate - the CC Co's rate went up for them, but your rate went down thanks to the Fed. CC Cos can't fund their operations if they're borrowing money at 7% and loaning it back to you at 7%. These same CC Cos then saw the Fed's TARP program as a "way out" - hey they get money at dirt cheap rates... sure they have to pay it back, it's not free money... and being able to borrow directly from the Fed Reserve can be big too. CC Cos have basically three revenue streams: merchant discount rates (you charge $100 at a store: the CC Co gets $2-3 minus what the networks and the processors charge, the store gets $97-98), account fees, and interest charges for loaning money. Each is kind of looked at in its own way as its own little profit/cost centre and all have to "make money" overall for the CC Co.

Hope this helps.

Mark.

[HillbillyBob]

14. My partner says, (his mom was a credit manager for years and yeas)

it's worse for you if you close an account... if they jack your rate, best you can do for your score is  pay it off, then every other month put $20 on it,  pay 10 one month, pay it off the next.  Then the next month, put 20 on again, then do the same thing
it's called "fuck 'em if they want to play the jack-up game, two can play it and the consumer wins"
"You had a good customer, wanted to gut the golden goose, now you have no cash flow"
You are now marked as Away.

Personally I think it sucks they mess up your credit rating if you've paid out your card and closed it. That seems kind of counter intuitive.

I have never had credit cards even when I could 'afford' them, all I have ever had was a gas card from Shell and that was a pay off every month.
I had a car loan that went bad about 20 years ago due to illness 6 months of pneumonia and I only owed about 5 more payments on it, was never late in the 4 or 5 years of the loan until I got sick.

This whole mess can be laid at the rpigs doorstep, they let the banks write the regs and the credit card rules, and cheney collaborated on letting the oil companies including enron write energy policy...what else don't we know about?

[terisan]

25. Joseph Biden is responsible for much of the credit card evil-when he is called to account we will ha

meaningful change.

This is absolutely the time to roll back the credit card fraud---why is out party not doing it ?

[ThomWV]

10. Wells Fargo is doing the same thing - but we found a way to deal with it.

We have (had) a card that we use(d) infrequently; most of the time it has(had) no balance due on it. The rate on it doubled last week. Not by coincidence it found itself cut in half and in the trash within 5 minutes of the notificaiton letter's arrival.

[Uben]

11. I got several of them

I have exceptional credit as well, but I don't see this changing much since I do pay them off every month. I keep a close eye on those "interest charges" each month. If I see any additional charges, I will just quit using the cards altogether. I know they feel they have to raise money somewhere, but it is not going to be from me! I pay every bill I have on every Monday so my rating stays exceptional. I have seen them change due dates to try and screw people around, but my system foils their little folly.

[myrna minx]

16. I suggest you check out this website: The New Credit Rules.com.

http://www.newcreditrules.com/newcreditrulescom/

This is a site created by a young man who is in battle with American Express, and thus has become quite a consumer advocate.

This has become a huge trend, especially for those of us with great credit. I had my Citi account's APR double overnight. I have never paid late, I pay twice the amount of the minimum, never bounced a check, never went over the limit etc, but my rate doubled, according to them "because they could." I would do some research before you close any account if you have debt. If you have debt, closing an account could harm your credit score, because it will effect your debt/available credit ratio. Another trend is credit card companies dramatically lowering your credit limit, also effecting your debt/available credit thus allowing any other cards you have to raise their rates. They just do what they want with impunity and we get to pay for it through our tax dollars as well as our regular payments.

I have been on track to be out of debt within two years, but now with the doubling of the fees, that's just not feasible. If they are punishing their excellent customers, I can't imagine how horrible it must be for someone who has accidentally missed a payment or had some unfortunate medical emergency or a job layoff. :(

[trayfoot]

21. Thanks! I bookmarked that url.

[terisan]

26. Useful site. thanks for posting. nt

[southern_dem]

23. I really think

it is time for a massive overhaul of the credit and credit reporting system. It has been in favor of the bankers for too long. Time for the consumers to get a fair shake.

[madokie]

24. I didn't get one, fancy that

I of course don't have any cards either by any of the companies and for the life of me I can't understand why someone would feel they need to have one to begin with. But thats just me...

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