Credit Card Follies (Merged Topics)

[Devonai]

Yesterday I received a notice that my credit card's interest rate was going to almost double to 14% starting in January.  Online payments would also be subject to a $15 fee, up until now at no cost to me.

The notice cited "federal legislation" as the reason for the changes.

I had the option of refusing the changes, which I promptly did.  This turns my credit card into a personal loan, essentially, as I can no longer use it to make purchases and the account will be closed once the balance reaches zero.

The customer service rep also cited "federal legislation" as the reason for the changes.  I asked her if she meant the new "consumer protection laws" that have been in the news lately, and she said yes.  I simply responded that I wished I had done more research because it sure felt like I was losing in every possible aspect of the new arrangement.

This is not really a big deal for me, as I have less than $1300 left on my card.  However, it does piss me off because I have never missed a payment, never been late on a payment, and as of April 2009 I've been paying at least quadruple the minimum monthly charge.  Why do I feel like I'm being punished for making prudent choices?  Is this nothing more than an "I told you so" from the credit card companies to the federal government, with the little guy getting the short end of the stick?

[vaskidmark]

"Online payments would also be subject to a $15 fee, up until now at no cost to me."

They are making you pay for the privilege of getting their money back immediately and avoiding processing a paper check?

Or did you leave out the part where they charge you even more for paying that way?

Are they just stupid?  No - don't answer that!

stay safe.

skidmark

[Gewehr98]

All too common now before the legislation goes into effect:

http://www.cnn.com/2009/POLITICS/10/09/credit.card.outrage/index.html

[makattak]

Yesterday I received a notice that my credit card's interest rate was going to almost double to 14% starting in January.  Online payments would also be subject to a $15 fee, up until now at no cost to me.

The notice cited "federal legislation" as the reason for the changes.

I had the option of refusing the changes, which I promptly did.  This turns my credit card into a personal loan, essentially, as I can no longer use it to make purchases and the account will be closed once the balance reaches zero.

The customer service rep also cited "federal legislation" as the reason for the changes.  I asked her if she meant the new "consumer protection laws" that have been in the news lately, and she said yes.  I simply responded that I wished I had done more research because it sure felt like I was losing in every possible aspect of the new arrangement.

This is not really a big deal for me, as I have less than $1300 left on my card.  However, it does piss me off because I have never missed a payment, never been late on a payment, and as of April 2009 I've been paying at least quadruple the minimum monthly charge. Why do I feel like I'm being punished for making prudent choices?  Is this nothing more than an "I told you so" from the credit card companies to the federal government, with the little guy getting the short end of the stick?

Because the government just forced the credit cards not to make money off the people who make poor choices. As a result, the people who make good choices will suffer.

ANYTIME the government does something, somone wins and someone else loses. It's a ZERO-SUM game. Our current administration wants to punish prudent people. We have to much prudence, it seems. Need to de-incentivize it.

[Ben]

I remember when this first came out, I heard they were also gonna hit people like me -- who use a credit card but don't carry a balance -- with extra fees (like paying an annual fee). I've been watching that on mine but haven't seen it yet. Has anyone else?

[mtnbkr]

I haven't noticed that yet.  I'm like you, I don't generally carry a balance (or I carry a small, sub 4-figure one for a couple months). 

Chris

[coppertales]

The interest rate on a couple of my cards went from 10 percent rate to almost 30 percent rate.  Good thing I rarely use these cards and I usually pay my balances off each month.  I applied for a CC at the credit union I have been a member with for almost 20 years and was denied.  They said I did not need the credit.  WTF.  I told the credit union to look at my payment records, my savings balance, IRA, and check account.  What is the problem?  They replied that the IRA funds can't be considered because you need to be 59.5 years old to access them without penality.  Duh, I am 65.....I ended up with a card, much to my surprise.  Banks, they are like women, hard to live with but you can't do without them....chris3

[Headless Thompson Gunner]

New legislation.  Unintended consequences.  Whodathunkit?

[sanglant]

i pay my cards to 0 each month, and i'll be canceling any that pull this shhhhhh stuff promptly

[makattak]

New legislation.  Unintended consequences.  Whodathunkit?

And, like most of the legislation, unintended but not unforseen consequences.

Economists might not be able to predict the EXACT future well, but fortunately how the government will affect things doesn't rely much on ceteris paribus.

[AmbulanceDriver]

I'm waiting for the outcry from the "poor" people who now suddenly find they can no longer finance their lifestyles with credit cards. 

[lupinus]

While it's a shitty practice, I also have a problem faulting the credit card companies in some ways.

They are a business, and like any other business they have a bottom line which needs to be met in order for them to keep their doors open.  To do that, they need to turn a profit.  Now that the government has stepped in and made it easier for people who are high risk and more likely to cost the issuing bank money, they have to make it up somehow.  And that is where you come in, the person who actually pays his bills.  And to increase the revenue they have to ensure that your bill goes as high as possible.  That means more fees for regular services or nickle and dimeing, higher interest rates, and additional annual or membership fees.  They know you are good for it, and that you can and will pay your bill. 

Just like with the housing boom and likewise sudden burst due to government intervention making lots of money available to unreliable borrowers, I don't see this ending any better.  Those who are responsible and pay their bills will come out with more money removed from their pockets but otherwise okay.  In the end the banks that issued the cards will be hurt, and those who use their credit unwisely and can not or will not pay back the borrowed money will get burned only to whine and cry about the evil banks.

[Ben]

To hit on what both AmbulanceDriver and Lupinus said:

It seems to me the gov is actually making it easier for low income / bad credit people to continue a fiscally irresponsible lifestyle by limiting interest charges on bad credit risks.

Thus, I also can't necessarily blame the credit card companies. They have a responsibility to their shareholders to turn a profit, and if they can't do so via interest rates designed to recoup losses from bad debtors, their only other option is increasing other rates and charges. I'll certainly go looking for another CC company if I start getting hit with annual charges, but can't really blame my current company if they do so because of the govt intervention.

[Devonai]

Thanks for the feedback.  At least I know they're picking on us equally.

G98, thanks for the link!

[AmbulanceDriver]

To hit on what both AmbulanceDriver and Lupinus said:

It seems to me the gov is actually making it easier for low income / bad credit people to continue a fiscally irresponsible lifestyle by limiting interest charges on bad credit risks.

Thus, I also can't necessarily blame the credit card companies. They have a responsibility to their shareholders to turn a profit, and if they can't do so via interest rates designed to recoup losses from bad debtors, their only other option is increasing other rates and charges. I'll certainly go looking for another CC company if I start getting hit with annual charges, but can't really blame my current company if they do so because of the govt intervention.

My point though, is that eventually they (the CC companies) are simply going to start refusing people with marginal credit and below.  THAT is the outcry I'm waiting for.  Gleefully, even.  :)  No more credit with high interest rates, as they simply will not be worth the cost due to the new credit rules.

FWIW, I do have a credit card, as does my wife.  We don't use them.  Currently, our ONLY debt is my student loan (which I kick myself every day for taking).  We are getting ready to close on our first house, which will require a mortgage.  But we will pay off as much as possibly as speedily as possible.  It doesn't hurt that we're getting a mid level home for a starter home price, either.  Just needs some TLC to clean up, a couple of little improvements here and there, and we can likely sell it for 30% more (or maybe even more than that) than what we bought it for, once the economy unborkifies itself.  

[Ben]

My point though, is that eventually they (the CC companies) are simply going to start refusing people with marginal credit and below.  THAT is the outcry I'm waiting for.  Gleefully, even.  :)  No more credit with high interest rates, as they simply will not be worth the cost due to the new credit rules.

But will they be allowed by the govt to refuse credit to many of these people?  I would hope so, but I wouldn't be surprised if some of the "rules" require them to service people with lousy credit because they meet some demographic criteria.

This isn't an argument regarding what you're saying. I don't know enough about these new rules to debate the point one way or the other.  :|

[lupinus]

Thanks for the feedback.  At least I know they're picking on us equally.

Actually a couple months ago my CU upped my limit and dropped my rate by 5% 

My point though, is that eventually they (the CC companies) are simply going to start refusing people with marginal credit and below.

With government rules that is harder and harder, which is why people are getting raised right now.

[Headless Thompson Gunner]

I'm waiting for the outcry from the "poor" people who now suddenly find they can no longer finance their lifestyles with credit cards. 

It'll be the credit card co's fault, not the legislators.  And it'll serve as justification for even more onerous legislation on credit card.

Basic engineering.  It's a positive feedback cycle, and it won't stop until something breaks.

[crt360]

Wow.  This may be the first thread I've ever seen anywhere that was so "yea!" credit card companies.  The "boo!" government part I understand as it seems to be a regular theme.

Although I have no doubt the credit card companies will tell cardholders the new legislation is the cause of all their problems, the laws enacted were fairly weak.  The major provisions involve giving additional information to the cardholder, extending time limits for rate increase on late payments and requiring a payment due date that's a reasonable time from the billing date.  Unlike the laws in place that regulate (with criminal penalties) the interest rates that nearly every other industry can charge, there is nothing here that caps interest rates on credit cards.  They can continue to jack them as high as they please.  There's also nothing to keep the companies from continuing to extend credit to all of the high risk, poor-choice-making people they always have.  I believe this was more of a friendly spanking by legislators who have always been under the influence of the banks.

Will it cut into their enormous profits?  Not if they can help it.  And I don't think there's ever been a sign on the wall at BofA's corporate headquarters that says "Let's go easy on prudent cardholders."

Here's an easy to read breakdown of the new credit card legislation:  http://www.stopbuyingcrap.com/personal-finance/credit-card-act-2009/

[Gewehr98]

Wow.  This may be the first thread I've ever seen anywhere that was so "yea!" credit card companies.

Where'd you see that in this thread?

I saw where folks are explaining how and why credit card companies are doing what they're doing.  That's neither an endorsement nor cheerleading... 

[Balog]

I'd like to take this opportunity to officially endorse cheerleaders who use credit cards.

[crt360]

Where'd you see that in this thread?

I saw where folks are explaining how and why credit card companies are doing what they're doing.  That's neither an endorsement nor cheerleading... 

G98, maybe I got a little carried away (I must have been anticipating Balog's last post).  Scanning quickly back through, I found only one cheer and two mild displays of wavering support. 

cheer:

My point though, is that eventually they (the CC companies) are simply going to start refusing people with marginal credit and below.  THAT is the outcry I'm waiting for.  Gleefully, even.  :) 

wavering support:

While it's a shitty practice, I also have a problem faulting the credit card companies in some ways.

Thus, I also can't necessarily blame the credit card companies.

I think I was mainly trying to convey my surprise that more people didn't see this coming as a result of credit card industry practices and the need for Congress to make a decent showing (without really doing much).

[lupinus]

How does "It's a shitty practice" show support?

There is a difference between supporting an action, and understanding and action to the extent it doesn't piss you off.

[seeker_two]

I'd like to take this opportunity to officially endorse cheerleaders who use credit cards.

Me, too.....



http://www.hollywoodteenmovies.com/Kirsten.jpg

 

[AmbulanceDriver]

Crt, trust me, I'm not cheering the CC companies.  I think that for the most part they're leeches on the bottom of the economy.  As I stated, yes, I have a credit card.  But I don't use it.  And likely never will again, once I really started figuring out how credit works.  Eventually the CC company will drop me for lack of use.  That doesn't make me the least bit sad.

My comment has more to do with the unintended consequences of the dumb legislators.  I think it will be a very good thing for people who do not understand how credit really works, or are simply irresponsible, to have less credit available to them.  And yes, I'm basing the assumption that they don't really understand how credit works, or are irresponsible, on their low credit scores.  That is a generalization, and I know there are exceptions.

Believe me, I think it's wrong for government to tell the CC companies that they can't charge higher interest rates on people who are a poor risk.  (don't like the gov't interference)  But I also don't like the CC companies in general on principle.