Posted on 02/13/2008 7:59:39 AM PST by Alex Murphy
Though the Federal Reserve's recent move to cut the interest rate was meant as a reprieve for the stifled economy and consumers, some people are finding their credit card rates actually increasing.
Drastic jumps in interest rates have occurred even when a cardholder has had a record of paying on time, like in the case of Carita Marie Gamble.
The 72-year-old grandmother, who lives on a fixed income, was shocked to see her rate jump from about 16 percent to more than 26 percent last month.
"This has put me over the top financially," said Gamble, who has emphysema and had a tracheotomy.
Her monthly income of $1,100 has taken a huge hit now that her credit card bill has increased more than $400.
"I worry that she's not going to make it or she's going to have to sell her home. And we've looked into that," said Gamble's daughter Carita Marie Gamble.
The elder Gamble said she has always paid her Chase bank bill on time, even if it was just the minimum amount. The Gambles were shocked to learn the interest had increased because the mother had opened a new credit card. The bank told Gamble the new rate was permanent.
While Chase bank would not speak to ABC News on camera, Gamble's interest rate did decrease after "Good Morning America" contacted the bank. The rate is lower than it was before the hike and Gamble said she was told the interest she paid would be refunded.
"I'm not asking to make my bill go away. I did not like the way I was treated. And I feel they're money grubbers. That is not the way business is to be conducted," Gamble said.
Congress Steps In
Radical rate hikes like Gamble's are perfectly legal. In fact, since 2003 banks' penalty fees have jumped from more than $11 billion to $18.1 billion last year a 65 percent increase.
But Sen. Carl Levin, D-Mich., is trying to change that by leading a charge in the Senate to conduct hearings and introduce legislation to stop banks from raising interest rates on customers who have paid their credit card bills on time.
Lawmakers in the House of Representative have proposed legislation, too.
"Many cardholders can be paying their cards on time, playing by the rules and they find their interest rates have gone up. This is totally unfair," said Rep. Carolyn Maloney, D-N.Y.
Industry Response
An industry representative said the variable rates of credit cards often lag behind after a change in the Federal Reserve's rate, but many consumers are seeing a decrease.
"In general interest rates for credit cards are going down," said Nessa Feddis, of the Credit Card Practices Attorney for the American Banker's Association.
Both competition and pressure have fueled changes in the industry, she added.
Feddis said people who are deemed riskier borrowers should expect their interest rates to be higher, but card companies allow them some leeway.
"They have a vested interest in having loans that can be repaid," Feddis said. "If you pay on time for the next six months, your rate will go down again," Feddis said of customers who have missed a payment or paid late.
While critics have complained that credit card disclosure statements are difficult to read and interpret, Feddis said consumers should pay attention to them.
"The disclosures could be better," she said. "The disclosures should be read and people can understand them."
Mailboxes across the country are filled with 0 percent introductory rates, which often make a rapid jump after six months. It's all in the fine print.
"It's hard to find that 0 percent is a bad deal, even if it's for six months," Feddis said.
Haven’t you heard that our economy is driven by spending?
Anyone who saves and avoids debt is a traitor and wants the terrorists to win.
Patriotic Americans spend like there’s no tomorrow.
That’s why we’re cutting interest rates again, to encourage patriotism.
/sarc
Assuming she has a decent credit rating, she should call the company and threaten to cancel her card.
They will probably find a reduced interest for her.
I usually pay my balance off each month. Three years ago, my CC billed me for an interest charge. It was posted a week after they posted the full payment that gave me a zero balance. I called, gave them a tonguelashing, and got a full credit.
The interest amount was only about $2.50, but it was the principle of the thing. They thought most of their customers wouldn’t check such, or wouldn’t bother to complain about a small amount. A single overcharge of $2.50 is nothing, but overcharging a few million customers adds up to a hefty sum, even if large percentage of customers do call and complain. If a million don’t call, the CC has pocketed a tidy couple of $million or so.
They have not tried that little tactic on my card since.
“So you buy plane tickets, rent cars, purchase items online with what? Cash? Cashier’s check? A debit card?”
Ever heard of American Express?
“So you buy plane tickets, rent cars, purchase items online with what? Cash? Cashier’s check? A debit card?”
debit cards work for me.
Debit card with one of the credit card logos on it. The only thing that's dicey is renting a car. Most won't let you but I think Budget and Alamo are ok.
My Capital One card is 9.17%, the minimum payment due is usually around 3% of the balance. I’m guessing she owes around $10-12K and her minimum payment went from $200 to $600.
How much does this woman owe?
“I worry that she’s not going to make it or she’s going to have to sell her home. And we’ve looked into that,”
I would just quit paying on the card.....period. There is no way I would lose my home over a cc. You can’t get blood from a turnip as my grandmother used to say.
The card companies don’t care.
I’ve been with one for 19 years. Never a late payment.
Credit score of 822.
They hit me with a $5.25 finance charge that I considered bogus.
All the parrot on the phone could say was “read your terms and conditions more carefully next time”.
Needless to say, there will be no “next time”.
You’re correct. But I’m thinking more along the lines of consumer protection. You get zilch with a debit card, esp when buying things online and renting cars. I should have clarified that. (Duh, me)
“Debit card with one of the credit card logos on it. The only thing that’s dicey is renting a car. Most won’t let you but I think Budget and Alamo are ok.”
Yes, there are certain places you have to watch...like hotels who will typically put on twice what the stay would normally cost. They claim it’s to protect themselves against damage.
I keep a checking account with VISA check card specifically for online purchases. I fund it as necessary.
Quick and dirty calculations show that her balance is between $30,000 and $40,000. Stop burning up your plastic on $1100 fixed income, Grandma!
“You’re correct. But I’m thinking more along the lines of consumer protection. You get zilch with a debit card, esp when buying things online and renting cars.”
Not entirely true. It depends on the bank issuing the card. I’ve had great experience with my bank and putting holds on charges.
What kind of balance is she carrying on that card, which resulted in a $400 increase in interest alone?
My student loans, long since paid off, were at 7.75 percent, and I paid $6.60 per $1,000 borrowed each month. So 10% would be about $8.50 per thousand per month. If her monthly interest INCREASED $400.00 due to a 10% rise in her interest rate, her balance was about [pause to pull up the calculator] $47,000.
More and more renting a car on a debit card is easy. The downside is the very large hold they put on your cash.
You’re way smarter than most consumers.
This lady is using her CC like a bank loan....sheesh.
“You’re way smarter than most consumers.”
Not necessarily smarter, just more protective and I monitor my finances closely.
By my calculations, if her minimum payment jumped $400, then she has about $50,000 in CC debt. In other words, she has consistently lived beyond her means and now it’s time to pay the piper.
More like $50,000.
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