Liveblogging The Senate Permanent Subcommittee On Investigations Hearing On Arbitrary Credit Card Rate Increases

Today at 9:30 a.m., Senator Carl Levin (D-MI) will continue his investigation into the unfair and deceptive practices of the credit card industry. Today’s topic: arbitrary rate increases for cardholders in good standing. The hearing picks up where Senator Levin left off in March, when he questioned the use of excessive fees, interest charges, and the abuse of grace periods.

Today’s hearing will feature two panels. First, three aggrieved consumers will share their horror stories. Then, the presidents of Discover, Bank of America, and Capitol One will explain that the three consumers who just testified are not at all representative of average cardholders. Right.

The tears and lies start flowing at 9:30 a.m.
(Photo: samwilkinson)

9:25: Two choices for your viewing and listening pleasure: Video LinkAudio Link
9:34: And we’re off. Levin has arranged for an interesting hearing. The first consumer we will hear from is Janet Hard. Janet is married to a steamfitter. She has a Discover card that jumped from 18% to 24% because her FICO score dropped. When Janet complained, the rate dropped to 21%. Discover’s President will testify today.

9:37: Levin is most incensed by the retroactive nature of rate increases. Take a consumer whose debt jumps from 15% to 27%. That new rate applies not to new debts, but to all incurred debts.

9:41: Bonnie Rushing has two Bank of America cards. One is associated with AAA. Both cards had an 8% rate. BoA bumped the AAA rate from 8% to 23% because Bonnie’s FICO score fell. It didn’t matter that her payment history was perfect. Bonnie isn’t sure why her FICO score dropped, but she thinks it may be because she opened a store-branded card at Macy’s to receive an immediate 10% discount on a purchase, unaware that it would affect her FICO score.

9:43: When Bonnie received the rate-increase notice, she opted-out and closed her account. BoA tried to pressure her to keep the new, higher rate, but after she complained to state and federal authorities, BoA let her close her account. BoA’s president will testify today.

9:44: Capital One raises rates by looking for accounts that haven’t been bumped in three years—but they don’t use FICO scores.

9:44: One consumer was hit by three rate increases in three months. Oftentimes the rates doubled or tripled. The consumer was able to reduce her rates by calling and fighting the credit card companies.

9:46: Levin: “If you shop with a credit card, as most consumers do, dangers lurk.”

9:46: Most people don’t realize that their FICO score drops even if they approach—not exceed, approach—their credit limit.

9:47: The Committee asked who determines a FICO score, who determines when a rate jumps because of a FICO score. The answer: computers.

9:47: Issuers don’t know why a FICO score drops. They have four “reason codes,” generic statements like: “balance grew too fast compared to credit limit,” or “balance on bank cards is too low.”

9:48: By law, consumers are entitled to know who supplies credit data. Even with this data, few consumers realize that a rate hike was caused by a lower FICO score.

9:50: When Janet Hard received her rate increase notice, she was told that it was because her balances were too high and her accounts were delinquent. When pressed, Discover couldn’t explain which balances were too high, or which accounts were delinquent.

9:51: Levin does not want any increases for consumers who pay their bills on time. At least not retroactive increases.

9:53: Credit card companies have drop rates when the Subcommittee calls to inquire about an account.

9:55: Levin’s solution is S. 1395, which would:

“bar companies from charging interest on debt paid by the due date, cap penalty interest-rate increases, prohibit interest from being charged on late fees or over-the-limit fees and prohibit late fees if a card-issuer delays crediting a payment.”

9:55: Senator Norm Coleman (R-MN) is claiming that the nature has credit has changed. It used to be something you earned. Now, creditors are tossing cards like confetti.

9:56: It seems like a personal problem, but it has nationwide implications.

9:57: For background: Abusive credit card practices affect everyone. In a country of 300 million, we charged more than $1.8 trillion dollars on over 691 million credit cards in 2005. Back in the eighties, Americans charged about $70 billion per year.

9:57: Coleman argues that the democratization of credit has helped America, but it has been tainted by federal regulations that raise rates. Eh? Coleman asked credit card companies to regulate themselves so Congress can focus on something else. Apparently, his strategy of “Be Nice, Please” is working. Double-cycle billing is now a thing of the past. See, no federal regulation needed. “These are serious steps and constitute self-reform.”

9:59: ‘There is a competitive advantage to offering fair user-friendly offers.’ Sure, but nobody does. At least he realizes that there still massive problems, with universal default and rate increases out of the blue.

10:00: Claire McCaskill (D-MO) argues that even lawyers can’t understand credit card offers.

10:01: Creditors hate closing accounts. You can’t call, or write on a bill that you want your account closed. You have to write a separate letter.

10:02: Senator McCaskill’s mother wrote in that she wanted to cancel her credit card. That didn’t stop them from sending her checks for the holiday season that would re-activate the card.

10:03: Excellent: McCaskill is calling credit card debt “The Next Subprime Disaster TM.” She is absolutely right.

10:04: If the credit card companies won’t stop financially raping Americans, McCaskill wants to break out some serious regulation.

10:04: Senator Tom Coburn (R-OK) has no opening statement.

10:05: Interesting: Levin is swearing in the witnesses. Most testimony is not sworn—there is simply no need. Lying to Congress is a felony that carries up to five years in jail.

10:06: Here is Janet Hard, the consumer with the Discover cards.

10:06: Janet is a registered nurse turned stay-at-home Mom.

10:07: She used credit cards to make ends meet, which is always a losing strategy. She figured that she could make boost her income when she went back to work when she stopped taking care of her kids.

10:07: She learned about the rate increases only after she realized that her payments were no longer reducing her debt at the usual clip.

10:08: Janet was initially told that the rate was increased because of a spot credit check. When she called to complain, Discover agreed that she was an excellent customer, but refused to drop the rates.

10:08: She also has an HSBC account, which accesses the same credit data. HSBC did not raise her rates.

10:09: She does not want to shirk her debts. She wants to be treated fairly. “We feel as though we’ve been robbed.”

10:10: Onto Bonnie Rushing. Downsizing cost her a job and income security, but she never missed a credit card payment.

10:11: Still, the rate on her BoA AAA card unexpectedly tripled. Bank of America said that she had been sent a change in terms notice without responding, and so her rate was bumped. Bonnie could no longer refuse the rate or close the account.

10:13: Bonnie tries escalating to a supervisor, who offered to renegotiate the rate down from 23% to 21%, still much higher than the 7.9% Bonnie had enjoyed.

10:14: AAA intervened and was able to press BoA into accepting the original, fixed rate of 7.9%

10:15: A bank executive told Bonnie that the change was made because she was a “good long-standing customer whose business they did not want to lose.”

10:15: Bonnie took her experiences with the call center very seriously. More than anything, she’s upset that they treated her without respect, without realizing that she was a decent person who was trying to responsibly pay off her debts.

10:16: Onto Millard Glasshof, who has been retired since 1992. He’s here with his wife.

10:16: In 1997 he received a MasterCard with Bank One. He originally agreed in 2004 to payoff a balance of over $5,000 at 14%.

10:17: In March 2005, Chase took over Bank One and bumped the rate to over 17%.

10:18: Millard had never missed a payment. Chase could not explain the increase.

10:19: He received a letter, which he didn’t understand. He thought it said that his new payments were $111. He called to confirm, which Chase did. When he paid $111, Chase hit him with fees for insufficient payments.

10:20: After the Subcommittee looked into his situation, Chase miraculously dropped his rate to 6%.

10:20: Janet’s original debt was over $8,000. She made only $500 in new purchases. Of $2,400 in payments last year, $1,900 went towards interest, not the principal.

10:22: Janet had no idea that her rate increase was triggered by her credit score. Her rates were dropped back to their original levels after the Subcommittee started asking questions.

10:23: Millard had $4,800 in debt. Last year he made no new purchases, but did pay $1,100 in interest and $200 in fees. He made $1,300 in payments and still owes $4,800.

10:24: Millard had no idea why his rate was increased.

10:24: He hasn’t missed a payment in two-and-a-half years.

10:24: Chase says that an automated review of closed accounts, like Millard’s, showed that his FICO score had dropped, triggering a rate increase.

10:25: Levin is really pissed that these rate increases are retroactive. More troubling, none of the consumers testifying realized that rate increases applied to past debts.

10:28: We remember a program we watched some years ago—it may have been Frontline’s look into credit cards—when our favorite debt-expert, Elizabeth Warren, explained that credit cards are the only financial instruments that retroactively raise the price of goods after purchase. How would you feel if the guy at the electronics store knocked on your door, pointed to the TV in your living room, and said “By the way, that now costs $500 more. Pay up.” We hadn’t thought of it like that before, and it bothered us greatly.

10:32: It may have been this Frontline episode. Well worth watching.

10:33: Back to the hearing. Senator Coleman wants to know why the consumers didn’t receive (or read) the notices from credit card companies.

10:33: Millard is arguing that he never read in any of his notices that his rate was increasing. That would have helped.

10:34: Janet thinks notices from credit card companies are deliberately misleading.

10:34: Coleman: “Do you know what the U.S. Prime Index is?”
Janet: “No, I do not.”
Coleman: *stunned silence*

10:35: Coleman: “I’m trying to figure out what, if anything, we can do with notices.” He thinks Janet was pretty much screwed from the start because of her debt levels. She had no hope. All her fault. “You may have been treading water, you may have treading for a long time.”

10:36: We have an idea for notification, Senator. If a credit card wants to increase a rate, they should sent a notice. The notice should have two lines in massive fonts that show:

  • Your Current Rate;
  • Your New Rate

Maybe an easy, one-step way to refuse or cancel would also be nice.

10:41: Senator McCaskill is reading the paragraph that raised Millard’s rate. Nobody understands what she is saying.

10:41: McCaskill: Did you call after you received this letter and ask what you were supposed to pay?
Millard: Yes.
McCaskill: Did they send any confirmation?
Millard: No.

10:42: Ok, we want back and found Elizabeth Warren’s statement:

Frontline: But they would say they’re just making capital or money available to people in a convenient way.

Warren: Well, in a convenient way, and changing the price after people borrow it. You know, that’s a heck of a deal. I don’t know any merchant in America who can change the price after you’ve bought the item except a credit card company. After you have borrowed the $5,000, they can change the interest rate from 9.9 percent to 29.9 percent. I just don’t know anyone else who can do that.

Hey, listen … you make exactly the point that the credit card companies keep trying to make: “Hey, … we don’t make anybody take the money.” And they’re right; they don’t hold a gun to anybody’s head when they borrowed that money. But they did the much, much slicker way, and that is, they just put it all into contract papers. They put it all in clauses that people can’t read. They put it all in things like “universal default terms” and “15 days to change the terms of this contract” and arbitration agreements that [say] “We will hold the arbitrator to see if we have abided by the terms of the contract.” … They have teams of lawyers to figure out just the way to write the contracts that will maximize the profits for the credit card companies and minimize the likelihood that any customer will quite figure out what has happened when he or she uses that credit card.

10:46: We think Tom Carper is giving a statement. He represents Delaware, where most of these credit card companies live. He’s going to ask the witnesses what they would do if they were credit card companies. This should be good.

10:50: Carper: Is it not unreasonable to raise rates when a customer’s risk increases?

10:51: Oh, he’s talking universal default, the most evil and hated practice where a credit card company boosts your rates because you didn’t pay a late fee owed to the library. Real fair and equitable.

10:51: Holy shit, I can’t believe this worked. Bonnie: “Credit card companies are businesses, they have obligations to their shareholders.” Come on, Bonnie, realize you’re getting played and hit back!

10:52: Bonnie walked into the trap, but at least she’s arguing that she met all her debts and should not have been subject to a rate increase.

10:53: Levin comes back to argue that the increases are automated and unfair. “If it’s a risk-based decision, isn’t it weird that you were sent additional blank credit card checks in the mail?”

10:54: We like Levin’s style. Rather than look over at Carper and say: “Dude, shut up,” he’s having every witness show that the rate increases had nothing to do with their risk profiles. Such a classy place, this Senate of ours.

10:57: Coleman’s back with a hypothetical. He’s asking if anybody would have a problem if they could no longer use their credit card and pay off the debt at the existing rate.

10:57: Nobody does.

10:58: Bonnie: “No, that’s how a contract should work.”

10:58: Carper is arguing that that current disclosure laws force banks to offer just that.

10:59: Bonnie: “No, they said I could not do that. Point-blank, ‘No.’”

11:00: Carper: Did you look for new credit cards?

11:00: Witnesses are confused. Why would they look for new cards?

11:01: McCaskill wants to know if anybody was warned that using a credit card to pay off another card carries separate charges.

11:01: Nope, nobody knew.

11:01: The witnesses are dismissed.

11:02: *Cue ominous music, summon industry representatives*

11:04: The representatives have also been sworn in.

11:04: Here is Roger Hochschild, President and CEO of Discover.

11:04: He’s going to talk about pricing policies.

11:04: Pricing is based on each customer’s risk profile. “We make every effort to ensure that a customer can manage the credit we give them.”

11:05: It’s because credit cards are different than other loan products. Each transaction is a new loan, and they’re responsible to make sure each loan is paid.

11:05: Now he’s going to talk about all the background work they to do to set a base APR.

11:06: “We decline more applicants for credit than we approve.” Really?

11:06: They don’t solicit high-risk customers or offer them special products like balance transfers. They even reach out to people who seem like they might be in trouble before their accounts are delinquent. Wow, what a great company.

11:07: “The risk associated with some accounts rises over time.” It’s just like automobile insurance, see? If you get in an accident, your rate increases. Not crazy, just reasonable.

11:08: When they raise rates, they give customers the option of closing the account and paying off the debt at the current rate.

11:08: Their philosophy is to “Do The Right Thing.” Just like Spike Lee.

11:09: Onto Bruce Hammonds of Bank of America, who sounds like he has the entrails of the poor caught in his throat.

11:09: “We constantly monitor our customer’s behavior.” And you folks worry about government.

11:10: 9%-10% of customers refuse higher rates, close their accounts, and pay off the debt at the old rate.

11:10: Risk-based pricing is good for consumers, says the largest bank in the country.

11:11: Ha! Customers who are re-priced often adopt better financial practices. Right, that’s what happens, BoA. Don’t feel free to provide data.

11:12: Bank of America is arguing that they are a friendly bank, even friendlier than Discover.

11:13: “Customers like our policies.” “We listen to our customers. I personally have spent hundred of hours listening to our credit card customers.”

11:13: “If any of us are wrong, the market will tell us.” (By crashing.)

11:14: Onto Ryan Schneider of Capital One. Repricing is an “essential tool.”

11:15: He just argued that credit cards are not like car insurance. Hear that, Mr. Hochschild?

11:15: “Capital One shares your concerns.” Awww.

11:15: They have just one policy that governs repricing. See, just one policy, which means consumers are safe.

11:17: Consumers need to miss a payment by more than three days twice in a year before they are repriced. Capital One does not look at bounced checks or FICO score shifts. They also don’t use universal default, which actually is a very good pro-consumer policy.

11:18: Levin’s first question to Discover: What happened with Janet?

11:20: Roger doesn’t want to talk about it, because it’s personal. But he will, anyway.

11:20: They used a “holistic approach” to her account. He just called her a liar and said she missed payments.

11:21: Levin is asking about her payment history.

11:21: Roger agrees that she was repriced even though she made all her payments over the course of a year. She was charged no late fees.

11:22: Ah, Roger is complaining about one late payment from March 2004.

11:22: Other than that, she was on time. What a terrible customer.

11:24: Levin is asking why Discover won’t agree to limit their use of universal default.

11:25: Roger: “Not using a cardholder’s behavior on other accounts is like taking the battery out of the smoke detector.”

11:26: Levin: “It’s not important to Citibank? It’s not important to Chase?”

11:27: Levin is lecturing BoA about the basics of fairness, calling them financial bullies. “Why should [your customer] be penalized because of some outside activity, which never happened—that she didn’t know of—why if it’s good enough for major companies like Chase and Citibank, why should you at Bank of America continue that practice?”

11:29: Bruce of BoA: Because their risk increases! “We have a responsibility to the safety and soundness of the institution.”

11:29: He disagrees with McCaskill, credit isn’t like the subprime sector—but would be if they lost the ability to reprice based on consumer risk. See what he did there, hijacking her argument?

11:31: Uh-oh, Bruce is angering Chairman Levin. In his testimony, Levin argues that BoA boosted Bonnie’s rate because she was getting closer to her debt ceiling, even after they sent her checks that if used, would bring her closer to her debt ceiling. Bruce is hedging, saying it wasn’t really the checks, it was other things, like um, you know, stuff. Levin does not seem convinced.

11:34: Senator Coleman wants to know if credit card companies can improve the way they give notice.

11:35: Regulation Z will already change the appearance of bills and rate change notices. Credit card companies supported the new regulations, in part, to escape from stricter action from Congress. That strategy might not work out.

11:37: Coleman: when you buy a car, you can compare to several others. Credit card companies are similarly different, with varying policies on rate increases, opt-out, etc. How can consumers judge the different policies?

11:38: Let’s see how the companies cloak their notices as something other than legalese.

11:38: Capital One sees the onus on Regulation Z to make notices clear.

11:39: BoA agrees, but it’s not easy because consumers want rewards and bonuses, and he doesn’t know how to keep up. And if consumers dislike BoA, they can go to any other competitor.

11:39: Discover thinks it’s great (not dangerous) that consumers have more than one card, because they can shift their business based on how companies satisfy their needs.

11:41: Discover: “Credit cards are excellent tools for the middle class.”

11:43: McCaskill wants to know why it seems that the behavior the companies encourage is the behavior they use to indicate risk.

11:44: She wants to know how her mother (oh, it’s personal) was charged $9 interest by a credit card company that owed over $200. How could she be charged interest by a company that owes her money?

11:45: Discover apparently has a guide to using credit wisely on the internet. McCaskill is not pleased with this answer.

11:46: She wants to know at what point they stop sending checks to people approaching their credit limit.

11:48: Nobody has an answer. It’s based on risks, not the credit line. “If the risk is up, we stop sending checks.”

11:48: McCaskill’s mother was obviously a high-risk card-holder, with lots of cards, lots of debt, but she still gets checks.

11:49: All three state they don’t use credit scores as the sole basis for raising any rate.

11:51: Good, McCaskill wants to see BoA’s data that consumers pay more after their rates are raised. “That seems mighty counterintuitive.”

11:51: The credit card representatives breathe a sigh of relief as they are embraced by the soft easy questions of Delaware Senator Tom Carper.

11:52: Now they get to talk about how much they care about consumers. They love us, they really do, and they constantly strive to keep us educated.

11:55: Carper: Do any regulators tell you how to manage risk?

11:55: Now everyone gets to point to Office of the Comptroller of the Currency as the source of meaningful federal regulation. Hmm, let’s scroll through the archives to see how past editors might characterize those meaningful regulations:

The Currency Comptroller routinely goes double-dildo with national banks to undermine states’ consumer protection laws.

11:57: Carper with a hardball: “What stops me from taking my business to another creditor? Because I get offers everyday.”

11:58: Everybody: Nothing stops you!

11:58: This is what preachers know as “call and response.”

12:01: Discover had no clue that they lowered a witness’ rate. It certainly had nothing to do with the hearing. Know how? Because otherwise Discover’s President would have known before this morning.

12:02: He does seem to know an awful lot about why her rate dropped, you know, for someone who didn’t know her rate fell.

12:03: Contradiction alert: Roger just said that any factor in the risk model could affect her risk profile, and that a credit score, by itself, could affect her rate. Let’s go back to 11:49:

All three state they don’t use credit scores as the sole basis for raising any rate.

Can anyone reconcile the discrepancy in this sworn testimony? Bueller? Bueller?

12:07: Levin wants to know about opting out.

12:09: All agree that it requires a proactive notice from a consumer.

12:11: Levin wants to know why people shouldn’t be able to opt-out at any point if they stop making payments and just put the card down.

12:12: His scenario: someone doesn’t understand the opt-out notice and just says “the heck with this company,” without making new purchases.

12:12: Discover: If they do not opt-out, right, they are charged the higher rate.

12:13: BoA: Yep.

12:13: Levin: “That strikes me as manifestly unfair.”

12:14: Levin wants to know if Hammonds of BoA is troubled by Bonnie’s rate increase from 8% to 23%.

12:16: Hammonds: Well, everyone used to pay 19%.

12:16: Levin: Did her story trouble you?

12:16: Hammonds: Sure, sure. But I do believe we made the right risk decision.

12:17: One of the highest indicators of risk is constantly making the minimum payments.

12:18: BoA discourages customers from making minimum payments. Behind the scenes, not say, by printing any warnings on the bill.

12:22: Levin is bringing the hearing to an end, but is reminding consumers that credit card companies do not treat their customers fairly. Several pieces of legislation are in the pot, and Levin will make sure the issue stays on the Senate agenda.

12:30: If you want to learn more about the inner workings of credit cards, we highly recommend that you watch Frontline’s documentary on abusive credit card practices. We also caution everyone as we roll into the holiday season, please use your credit card responsibly. Don’t take on debt you can’t afford, and don’t ever let anything stop your from paying off your credit card in full every single month.

Comments

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  1. FlyingChainSaw says:

    First rule: you deal with a bank, all your money are belong to bank.

    Any questions?

  2. BigNutty says:

    Who wants to hear from Discover? I think their addition to this party is for publicity purposes only.

  3. Half Beast says:

    Wow…This thing has been going on for a half-hour, and my disdain for CCs has increased three-fold. I didn’t even know having too *low* of a balance can lower your FICO…
    It’s as if there’s no sweet spot or benefit to even being a cardholder.

  4. woah this post is like reverse coffee

  5. spartan789 says:

    this is real interesting actually. Seeing as the CC business has been pretty much unregulated since they really started taking off in the ’70′s, I think it’s great that our gov’t in finally going after them.

  6. Saboth says:

    FRY: Do you take Visa? CLERK: That card hasn’t existed for 500 years.
    FRY: American Express? CLERK: 600 years.
    FRY: Discover Card? CLERK: Mmm, sorry. We don’t take Discover.

  7. bravo369 says:

    it’s about time they did something about the credit card companies. As far as i’m concerned, if you are making payments on time and more than the minimum then your interest rate should not be increased AT ALL!!! Who cares if your credit score dropped. If you pay then that’s all they should care about.

  8. ditchell says:

    Almost done paying off a bunch of credit cards..and everything I read here confirms that I need to chop these little bastards up.

  9. mantari says:

    I had one of them also send ‘the letter’, wanting to bring me from ~8% to ~21% unless I opted out (and could continue to keep the card OPEN even). I opted out, US mail, with return receipt required.

    But I consider just the attempt to be very slimy behavior. Take a person with good credit and try to jack them up to 21% if they aren’t paying attention. NIIICCCEEEEE….

  10. Saboth says:

    @ditchell:

    Hell yeah… I had a card with Wachovia for YEARS. It was the first card I’d ever gotten, back in college. One day I was looking at the bill and was shocked to see my rate had gone from a long time 8% to about 20%. I called and they stated something about my debt to income ration was too high (although I have never missed a payment on anything in my entire life). I said thanks for the info…transferred my owed amount to another card and called to cancel my account. NOW suddenly a much lower interest rate was available, and even airline tickets to so and so. I was adamant, and cancelled. So…they tried to take me for a ride and completely lost my business forever. Good job.

  11. FunPaul says:

    Haven’t missed a payment in years. Only carry a balance on balance transfer only accounts. Somehow those low rate transfer cards keep jacking up the rate–even though they get paid on time.
    Once they are all paid off(looks like it’s happening this year) I am never ever going to carry a balance on these little fuckers again.

  12. FlownOver says:

    @Petrarch1603:

    You’re probably just the guy they want to do business with, then.

  13. FlownOver says:

    If you’re fortunate enough to be able to pay the full balance every month none of this matters. Be aware, though, that the CC industry has its own internal term for people like that: Deadbeats. Honest.

    Anybody need more evidence that these guys aren’t really focused on serving the customer?

  14. Half Beast says:

    11:13 “If any of us are wrong, the market will tell us.”

    Son of a…

  15. goller321 says:

    I had similar stuff happen to me. I have two Bank America cards (on used to be MBNA until they were bought out), one with $15,000 in credit and the other with $12,000 in credit. Both have sat unused essentially for two years because they jacked my interest rate from 9% to 22%. I called to see why, since I have had no late payments on any card and no real change in my borrowing habits (I did however take out a Kohls credit card.) They refused to lower the amount, but if I cancel those two cards, my credit score will tank, so I let them sit.

  16. goller321 says:

    @FunPaul: Yeah… what I love is when they magically “lose” a payment and your rate jumps from 4% to 30%… even if you have proof they are wrong, they won’t fix the issue. Had to cancel my American Express for this very reason.

  17. Mayor McRib says:

    Just substitute a few words to better understand these hearings.

    Company = Predator
    Interest = Juice
    Purchase = Loan

    Know who you are dealing with. These companies prey on uninformed people (I used to be one of them). Now I understand the game.

  18. vastrightwing says:

    Credit cards are dangerous. Use with extreme caution! You just don’t know what will happen next billing cycle. I got caught in the interest rate trap and ended up with a 31% interest rate from 0%!

    Solution was to take out an equity loan, pay off the card and NEVER EVER leave a balance on my card. I set up automatic payments (pushed from my bank). So far, so good. But I expect even with my due diligence, the card company will come up with some scheme to make me pay eventually when my guard is down.

    I hate them all!

  19. emona says:

    “We have a responsibility to the safety and soundness of the institution.”

    Translation: we care more about your money than you.

    Well, thanks for clearing that up, Bank of America.

  20. HRHKingFriday says:

    Hm. I know putting a lot of money on your card (and paying it in full every month) is good for your credit and all, but I just can’t seem to buy in to that. I keep a little BOA card (which is got upped to 20% overnight) that has almost no balance. I doubt I’d ever put anything on the card, but I know its better to keep it open. I really can’t fathom putting more than a couple hundred bucks on the card, even in emergencies. I keep a savings acct for emergencies- so the bank pays me. hah!

  21. jrdnjstn78 says:

    I had a Washington mutual card a few years ago. I had gotten maybe 200$ within my limit. Washington Mutual decided to lower my credit limit thus putting me over my limit and causing an “over limit fee”. I received no warning. I called and asked why they did that and they said because I was near my limit they considered me a credit risk even though I paid my bill on time and always over the minimum. I then told them that I would pay off the card and close the account. The lady then asked me if I would like to close the account right now? I told her sure, I can transfer the amount to another card with a much lower interest rate. This lady in no way cared to keep me as a customer. Yes I pay it off and closed it.

  22. Mayor McRib says:

    “Not using a cardholders behavior on other accounts is like taking the battery out of the smoke detector.”

    Wow! A super-unintelligent way to try to justify the universal default. It should be more accurately worded as “Not using a cardholders behavior on other accounts is like taking the battery out of the smoke detector, we would prefer to add gasoline to that fire.” Smoke detectors are meant to warn you in case of a fire, not cause one.

  23. r4__ says:

    @Mayor McRib: yeah, uh, I still don’t get the simile here. Who’s on fire? Is it the pants of the credit card companies?

  24. goller321 says:

    @jrdnjstn78: You have to be careful about closing accounts with balances as well. They can put you into a higher “default” type interest rate immediately and then milk you until they are completely paid off.

    Side note- on my Discover card I had a balance for a coupe of month and paid it off. Because of their way of billing, I wound up with interest after I paid in full on the last statement. I still have the card, but don’t use that one either.

  25. theblackdog says:

    Wow, the Discover guy is especially slimy, I’m glad Costco stopped taking their cards.

    I can’t wait until I pay off my credit card, then I can demand a lower rate.

  26. HRHKingFriday says:

    @goller321: Yeah, just get a couple cards, put 50 bucks on them and pay immediately after your purchase post to your credit cards. It takes a lot of willpower, which the average Joe doesn’t have, but is totally worth it in the end.

  27. Buran says:

    @Saboth: Allstate did the same thing when I changed car insurers. My response: “Gee, you have this lower rate available? Why didn’t you offer it to me in the first place? Then I wouldn’t have had an incentive to switch! You basically just admitted you’ve been ripping me off. My switchover takes effect on day (x). ‘Bye!”

  28. Buran says:

    @FlownOver: So I’m a deadbeat if I don’t pay my bills, and a deadbeat if I do? Damned if you do, damned if you don’t.

  29. krom says:

    Re notices. Change of terms notices are a) ridiculously thick with text and b) notoriously vague and inspecific. In fact, they don’t even actually have your name or account number on them. They are just one of a various selection of leaflets indicating certain term changes. They have the appearance of something every other customer got at the same time; but of course, that’s not true. I have two Sears cards — a store card and a branded Mastercard — and I remember getting a change of terms notice from Sears. The notice was simply an envelope addressed to me, with Sears in the return address, and containing one of those mass-produced leaflets. I realized that I had no idea which of my two Sears cards it applied to. There was no indication.

    My favorite bad-creditor story is the one from a few years back where a bank cancelled 12,000 branded Mastercards because the customers had been too good at paying off their balances.

    Remember, being responsible with credit makes you a poor investment for the credit card companies. They make money off interest and late fees.

  30. HRHKingFriday says:

    @krom: Amen to that! If they don’t take on people with questionable credit, there wouldn’t be massive profit. Its win-win for them. Best case scenario, they can keep someone paying interest on a heavy balance for years. Worst case, the card holder defaults, and then the bank can still reap profits from the gov’t. The inflation of interest rates is designed to push everyone in to the best case category- keep them paying as much interest as possible, therefore keeping them from paying the balance in a shorter period of time. All while throttling (to some extent) their card purchases and preventing full default.

  31. goller321 says:

    BTW- at GREAT watch is a Frontline episode- “Secret History of the Credit Card.”

    here- [www.pbs.org]

    it’s a real eye opener…

  32. kelmeister says:

    My husband has a card with Capital One that’s been sitting empty for a while due to payoff. We recently received a notice in the mail that we had an overdue payment, so the interest rate had been increased, as well as an added late payment fee. He went online to check, and discovered the card had suddenly spawned an annual fee that it’d never had before. I’ve never heard of cards developing annual fees, but it wouldn’t surprise me in the least.

  33. aaronw1 says:

    If you’re carrying a balance, you’re doing it wrong. Either make more or spend less. They could jack my rates up to 25% or more and I wouldn’t even notice. Now, if they drop my rewards from 5% to 2%, I’ll call them, threaten to cancel, and get a promo offer for 12 months of back up to 5%.