Posted on 12/10/2007 12:34:11 PM PST by ex-Texan
WASHINGTON -- Check your holiday credit card bills closely.
Some credit card companies are raising interest rates on good customers even if they pay down their balances, on time, every month. The reason they cite is that the customer's credit rating has fallen elsewhere.
That was a rude surprise to Janet Hard, a stay-at-home mother of two teenage boys from Freeland, Mich.
Depending on her husband's salary as a steamfitter while she raised the children was financially difficult, Hard said. To keep the family's finances in balance, Hard said she paid more than the minimum payment on her Discover card every month, plus an $8 Internet fee.
Or so she thought.
In February, Hard noticed that despite her payments, the balance was "barely moving."
A phone call to Discover solved the mystery, but not the problem: The company had increased her interest rate from 18 percent to 24.24 percent after running a spontaneous credit report that showed her other credit card balances and available credit on inactive accounts put the family at a higher risk of defaulting on their payments.
Most stunning, $3,478.39 out of $5,618 in payments had gone to Discover for interest accrued over the previous two years, Hard told the Senate Permanent Subcommittee on Investigations. On a monthly level, about $176 out of her $200 payments went to finance charges. In the past year alone, Hard had paid $2,400 but reduced her debt by only about $350.
"My husband and I feel as though we have been robbed," Hard told the panel Tuesday. "As we struggle to overcome this financially, we also are struggling to overcome it on an emotional level. Some days, this feels more difficult than the paying off of our balance."
The panel's chairman, Sen. Carl Levin, D-Mich., is sponsoring legislation that would restrict changes in credit card interest rates to certain instances -- such as at the conclusion of a low, introductory rate period, contracts that have variable rates and when a cardholder violates the agreement with the issuer.
"When a credit card issuer promises to provide a cardholder with a specific interest rate if they meet their credit card obligations, and the cardholder holds up their end of the bargain, the credit card issuer should have to do the same," Levin said.
Major credit card companies such as Citigroup Inc. and JPMorgan Chase & Co. have said they will discontinue the practice of raising a customer's interest rate based solely on a credit report. Capital One said its long-standing policy is not to change customers' interest rates if their credit scores go down.
But congressional efforts to make all credit card companies discontinue the practice is running into a buzz saw of opposition from the banking industry.
Consumer risk profiles change as underlying costs to the lenders change and interest rates must reflect that, said Ken Clayton, managing director of card policy for the American Bankers Association.
"Important criteria"
Not considering changes to a cardholder's credit rating "is like taking the batteries out of a smoke detector," said Roger Hochschild, president and chief operating officer of Discover Financial Services. "It's important criteria."
Hochschild and other top credit industry executives told the Senate panel that cardholders are appropriately notified of any changes, given time to opt out and pay off the card at the old rate, and to contact the credit bureaus whose reports may have spurred the rise in rates.
Consumers have other options, they added, such as contacting their credit card company and making new arrangements that might include fee waivers and new payment schedules.
Sen. Norm Coleman, R-Minn., said Congress should be mindful of unintended consequences by imposing new federal regulations on the industry, such as the return of high annual fees and less access to credit for people with questionable credit records.
With Americans weighed down by some $900 billion in credit card debt -- an average $2,200 per household -- practices of the very profitable industry have been ripe for scrutiny by the Democratic-controlled Congress. The Federal Reserve is paying attention as well and planning to require credit card issuers to give customers at least 45 days' notice before raising interest rates and to provide clearer information on fees.
Levin assembled anecdotes from consumers across the country that had one thing in common: All say they received surprise credit card interest increases -- to as much as 30 percent -- despite their history of prompt payments. None knew that the interest rate increases were triggered by lower so-called FICO credit scores.
Do you own your own home?
When they steal your credit card, they aren’t.
That’s the difference, and it’s huge, imo.
I carry cash...
...and a large-caliber sidearm.
Just as you or I would sell our house at the highest possible price, they are 'selling' their financing services at the highest possible price. They do it because they can.
That said, I pay my Chase card off monthly on line with no fee.
We are renters right now.
We want to save a bit, and pay a large down payment, and then pay off a house in 10 years.
(fingers crossed)
I understand that but there have been replies here that said they were charged a fee by Discover and others, including me, who have never been charged a "pay on line fee".
If I am selling my house, I wouldn't have one price for you and better price for someone else.
I have little sympathy for people who bought homes they could not afford hoping to play the equity game.
When buying a home:
1. Budget so that you can afford it on a 30 year fixed mortgage. If you want to speculate and play with different mortgage plans hoping to get lucky you will still have the fall back of a re-fi into a standard mortgage if/when things go south.
2. Buy a home you actually can and want to live in. That way, even if you were planning/hoping for a profitable ‘flip’ you still have something that works if the market takes a turn.
3. Insist on dealing with ethical people. If you didn’t interview your realtor, your mortgage banker, and/or your title agent then you have failed in your responsibilities.
** For most people buying a home is the largest and most significant financial transaction they will ever make. Treat the process with the proper respect and remember that it means more to you than it does to anyone else involved in the deal.
Could be some state laws that prohibit such charges in some areas, or it could be related to the type of account or even the credit rating of the customer. I'm not sure on that one.
God Bless you, LOL!
I, too noticed Discover had jacked their rates. I zero balanced the card and pay in full every month. Now they owe me ‘cash back’, and I am not paying interest. I don’t use the others—I just keep them for serious emergencies.
I sawed ‘m all up 15 years ago, and never looked back. Plastic sucks. If I can’t buy it out of my pocket, I sure don’t need it.
Ramsey said. "You are dealing with the devil. They only thing to do is destroy the plastic." Or words to that effect. He named the company in his broadcast.
Yes, I detest the ‘I don’t own a TV’ threads. Why, in one day, I can watch Anthony Bourdain introduce me to cuisine and countries I probably won’t visit (even if I travel later, I probably won’t go everywhere and not with a TV production budget, protection/security,) see Scotland in most of its glory, learn about WW I on the Military Channel, people who move large buildings and houses, the engineering behind the Khmer city of Angkor Wat and then ‘enjoy’ myself with any number of films.
It’s not that it should REPLACE reading but the idea that the TV HAS to be an idiot box is, in fact, an idiotic idea. For all of us who don’t have the money to go to the Galapagos, isn’t it nice to see things that even tourists won’t see (deep-sea diving and high quality photography in little submarines) AND get a narrated history lesson far superior to what I’d get in most places (and in English!)??
TV is a tool. It’s up to people to budget their time, watch programming that interests them but also find enrichment from the unique combination of entertainment and education available. Is it perfect? Of course not. It’s not designed to replace PhDs but it is able to truly widen your perspectives on the world and broaden your knowledge base. Things I would not consider bad at all.
I agree. Used properly, TV opens the world and places it in our living rooms. Reading about an event is great, but actually seeing it can make it even more real. Like you, I prefer both.
Let underwriters underwrite, and get out of the way.
She just never understood that the minimum monthly payment is deliberately set low enough to hold the balance steady instead of rising, but not high enough to pay down the balance in finite time. All she ever had to do is pay 2-3 times the minimum, or pay lump sums as funds became available between months she could only pay the minimum.
Anyone carrying a CC balance has a great savings plan available - pay it down and you are sure to earn 12-24%. So cut expenses and save already. Don't go whining to pols.
Geez...
Don’t worry...Everyone on FR PAYS their bill in its ENTIRETY every month...I know...they will be here to state that fact...soon...
I actually think this is a true statement. People in FR seem to be intelligent, conservative, and have high standards. Many of us have been through the “stupid” stages in life. I was pretty ignorant and dumb in my 20’s when I though credit cards were free money. Well of course I did not pay them off every month and actually had a few late payments. gasp!!!! But now that I am in my late 30’s I have for the last 10 years been MUCH better at ensuring my credit is good and within reason.
I’m already living in May 2008, when the postal rates go up another penny.
Everyone should only buy forever stamps. You will not feel the increase until they run out. For me, I bought about 200 stamps and I figure that should last at least until I die. lol. I am 38. Gives you an idea how often I use a stamp.
I pay my Discover off every month. Sometimes for emergencies I pay some of it off using my Home Equity account. Lower interest and deductible on your taxes. Plus, DIscover pays me money -about $20 a month....
I love Discover! They pay me money every month (which is why I charge EVERYTHING now) and they also have alot of fraud alerts....and I use that one-time number for all my internet purchases. It’s only good one time. They also called me one night asking me if I made some large purchases and I did not. Seems that Barnes and Nobles web site has a bug and they grabbed my number from their web site.
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