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Credit Card Bills Deliver a Shock
Portland Oregonian ^ | 12/05/2007 | Laurie Kellman

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.


TOPICS: Business/Economy; Culture/Society; Extended News; Government
KEYWORDS: credit; creditcards; discover; discovercard; fico
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To: Graybeard58

hahaha...!!


21 posted on 12/10/2007 12:52:36 PM PST by dakine
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To: ex-Texan

I use my two credit cards for anything and everything. But I also pay them off in full at the end of the month. That way I get the rewards but not the high interest rates.


22 posted on 12/10/2007 12:52:38 PM PST by AlaskaErik (I served and protected my country for 31 years. Democrats spent that time trying to destroy it.)
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To: knuthom
"There is only one good way to use credit cards. I use my credit card for everything, but I pay in full every month. I never carry a balance. I have always done it this way, even back when we had little money."

Same here. The credit card companies hate us. They consider us freeloaders.

23 posted on 12/10/2007 12:52:46 PM PST by JZelle
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To: Graybeard58

I’ll be darn. I thought I was the only one who did that.


24 posted on 12/10/2007 12:52:58 PM PST by Sue Perkick (And I hope that what I’ve done here today doesn’t force you to have a negative opinion of me….)
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To: dakine

I don’t even have a credit card. Why bother when I’m banking such coin filing bankruptcies for people who can’t or won’t pay their predators?

Who cares what the predators do, or what the law allows? I don’t care because I’m raking it in!


25 posted on 12/10/2007 12:53:06 PM PST by Unknowing (Now is the time for all good men to come to the aid of their country.)
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To: ex-Texan

Personal Finance needs to be taught at every high school. It’s amazing even how many college graduates don’t know the first thing about personal finance.


26 posted on 12/10/2007 12:53:11 PM PST by dfwgator
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To: Graybeard58

LOL!!


27 posted on 12/10/2007 12:53:44 PM PST by Obadiah
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To: knuthom

Using one credit card for everything and paying it off every month gives you a nice budgetary paper trail, doesn’t it?

It’s what I do too.


28 posted on 12/10/2007 12:53:49 PM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: dakine
Everyone on FR has “above average” children

Don't leave out the grand children, for those of us who have them.

I will have about 12 of them at my house for Christmas. I already can't wait for them to go home.

29 posted on 12/10/2007 12:54:20 PM PST by Graybeard58 ( Remember and pray for SSgt. Matt Maupin - MIA/POW- Iraq since 04/09/04)
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To: ex-Texan

Ok. She has a $7,000 credit card balance.

She pays an $8.00/month convenience fee to pay through the internet.

So she is voluntarily paying 1.5% extra, every month, just to save a stamp. And now she is whining because her interest rate went from 18% to 24.5%.

Some people are just too stupid to be permitted to handle money.


30 posted on 12/10/2007 12:54:29 PM PST by gridlock (Recycling is the new Religion.)
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To: Sue Perkick

Hi Neighbor!


31 posted on 12/10/2007 12:54:40 PM PST by Obadiah
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To: ex-Texan
Unless the contract stated that the company reserves the right to raise rates if the user goes below some FICO number, then this is nonsense.

It sickens me that I have to agree with democrats.

32 posted on 12/10/2007 12:54:41 PM PST by Dianna
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To: Obadiah

Discover keeps calling me because

I have the card, and haven’t made a charge on it for 6 months or more. They keep trying to offer 0%, etc. So far I haven’t needed that.


33 posted on 12/10/2007 12:55:25 PM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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To: ThisLittleLightofMine
We pay our cards off each month and have actually stopped using them at all because I find their practices so distasteful. I think if any area needs reform it would be credit card companies. They are a bunch thieves constantly changing their terms, they are predators and masters at marketing their evil.

You know - there is a free market out there. There are plenty of no annual fee and low interest rate credit cards you can sign up for. Credit Unions are a good place to start. Money Magazine every issue lists about 10 of the very best national cards. If someone signs up for Discover and then complains about it - it is a pretty easy fix WITHOUT THE GOVERNMENT "helping"...

34 posted on 12/10/2007 12:55:36 PM PST by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: Graybeard58

“...I already can’t wait for them to go home.”

HAHAHA!! Two chuckles from ya’....thanks!


35 posted on 12/10/2007 12:55:53 PM PST by dakine
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To: dfwgator

That I agree with.


36 posted on 12/10/2007 12:55:58 PM PST by RockinRight (Bill Clinton + Jimmuh Carter + Pat Robertson + Gomer Pyle = Mike Huckabee)
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To: Obadiah
but having said that, Discover Card is the WORST credit card company out there

They really are the lowest of the low, and one of the most devious.

37 posted on 12/10/2007 12:56:00 PM PST by AmericaUnited
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To: ThisLittleLightofMine
I don’t understand the premise of the whole thing. As I understand it the CC companies run a credit report see that someone’s credit may have deteriorated and then raise their rates. That seems like nothing more than making the situation worse by making it that much harder for them to regain good credit.
38 posted on 12/10/2007 12:56:03 PM PST by nomorelurker (keep flogging them till morale improves)
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To: Graybeard58

Hi neighbor! < /s >


39 posted on 12/10/2007 12:56:08 PM PST by weegee (If Bill Clinton can sit in on Hillary's Cabinet Meetings then GWBush should ask to get to sit in too)
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To: dakine

Yep, no chance that conservatives on a conservative website would be more likely to be financially responsible than the general public.

/sarc


40 posted on 12/10/2007 12:56:54 PM PST by MrB (You can't reason people out of a position that they didn't use reason to get into in the first place)
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