My Credit Card Interest Rate Raised for No Reason
Credit card companies are coming under fire lately, and in our opinion, deservedly so. Credit cards of all kinds are now taking advantage of the 10 pages of fine print you agree to when signing up for a new card, which gives them the rights to basically do whatever they wish to your interest rate. It is not uncommon now for good customers, those that pay their card in full every month on time, to have their rates raised. Sound unfair, well it is. Because of the problems associated with the mortgage mess and even hedge funds, banks are now looking for other ways to balance their books, and they are turning to the average consumer.Congress is now in tune to the problem and has held various oversight hearings. However, we feel it is unlikely that any major reforms in the industry are likely during the election year, but attention to the issue will only heat up. Half of Americans carrying total credit card debt average around $10,000 each (according to the U.S. PIRG). Because of the enormous amount of debt people are facing in other areas of their life with student loans, ARM mortgages etc., it’s hard for anyone to afford jacked interest rates on their credit cards.
Common Practices Credit Cards are Using to Get More From You
Double-cycle billing: This is a practice, which is confusing when explained in plain English, let alone when sifting through the fine print. Here, banks issuing credit cards will charge you interest on the entire amount you charged during a billing cycle, regardless of the amount you actually pay off. For example, if you charge $2,000 one month and pay off $1,900 leaving a balance of $100, the bank will make you pay interest on the full $2,000 in the next month and beyond, until the remaining $100 is paid off.Universal Default Pricing: This is a practice where banks are taking advantage of good responsible customers. Regardless if you have never missed or had a late payment on your current credit card, companies may now raise the current interest rate on your card if you are late on a completely different bill with a completely different company. In addition, they can raise your current rate if your credit score falls.
Zero-Tolerance Late Payment Policies: Little leeway now is given to customers
from certain financial institutions. You can now be charged the same late fee for being an hour or a day late as those customers who are months late on their payments. Keep in mind that due to the magical fine print you agreed to, any late fees may also result in a penalty rate imposed on your account, which according to CNN can top 30%, which can be applied to not only purchases you are going to make in the future, but also the ones you made last week!
Suggestions
Milk Your Money is troubled by these practices, which are becoming more common, and has a few recommendations you should take as a cardholder to ensure you are not a victim of these rate hikes.1) Read your statement each month. Look to make sure that the interest rate remained the same from the previous month. Look to see if any fees or penalties were charged to your account. If any of these appear on your statement, call you company and get explanations, you many see these charges dropped, just for asking.
2) Stop using multiple credit cards. The more credit cards you are using, the more likely you are going to “break the rules,” with one of the companies. For example, you might go over your credit limit or forget a payment. Focus on using one card and really understand the terms of the card to ensure you use the card only to your advantage.
3) Forget about rewards programs if you are paying interest month to month. Rewards from credit cards should only be taken into consideration for those that are truly responsible with their spending. Rewards average around 1% of your total purchases. This is a number, which is wiped out with one late fee assessed to your account or a month-to-month interest payment. Companies love that people are obsessed with earning frequent flyer miles or any other reward when using a card, many of these people don’t look at their credit card statement, but do look at how many miles they have earned. Money is money, so treat it that way.
4) Call your card issuer and ask for a lower rate. We have stressed this before in an earlier post. Nearly half of the people who call into their company asking for a reduced rate are successful. This is an amazing number! Credit card companies spend so much money marketing their cards and gaining new customers, that once they have you, they don’t want to lose you. Take advantage of this and ask for a lower rate today! $
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Comments
Thanks for the comment…you raise a few important issues also:
I wonder if that access to your credit report had any negative impact, just to have it accessed? I used to think quite highly of BofA but after looking into what they might offer to compete with some of the new online banks, I was disappointed. There only interest seems to be in being the old fat cat and relishing in the fact that they probably one of the largest banks in the US, instead of focusing attention on the services of its constituents. And 27%??? Thats an obscene number. I think we will do a little research and see what credit cards have the lowest/worst rates.
My interest rate with Chase was raised for no reason other than they just wanted to do it. I have been with Chase for years and years. I have never been late with a payment and I always paid over the minimum. I am not late on any other card, as Chase is the only one I use. They now lost a good paying customer for their stupid actions.
So you canceled? Did you request that they readjust your rate first? Others should also be wary of when credit card companies change the due dates or do double billing…these also lead to credit card holders having to pay more in fees without knowing.
Wells Fargo raised my rate from 5.9% to 18.9%. I have no late pays and credit scores +700. I know that I should have never built up $18k in credit card debt but I am now paying just under $300/Month in interest alone and -$500/month total. Prior to the interest rate increase I was paying $300/month total. Due to current market conditions my personal income this year ended up being half of what it was the prior year. I’m trying to pay $1k/month for the time being, and I’m looking into personal loan options with lower rates to transfer the balance. My savings is disappearing fast. In the meantime I will visit one of the Wells Fargo branches to withdraw my savings & checking, and start looking for a smaller local bank or try my credit union for future banking. So don’t bank with Wells Fargo!!!
Larry – I think you should consider calling the number on the back of your credit card and ask them to help you out. Explain your situation and ask for a lower rate.
so what can we do about the B of A unethical business practice ( interest rate increase ???? please anyone advice ??
it amazing how you can me mugged, and you cant do anything about it , and you can complaint to anyone , and you cant reverse the damage
After paying off the balance on my Chase credit card (approximately $10,000), my interest rate was raised. the timing is very questionable. Is this how the credit card companies treat their good customers?
American Express just raised my interest rate from 9% to 15.25%, I have never been late, and always pay more than the minimum. I called them and they refused to lower it. My Credit rating is 850, and I have never missed, been late, or gone over my limit… and I always pay more than the minimum. The Fed fund rate is at almost 0, and prime is at 3.25… that means they are making 15% profit on me simply because they can. In advance of the new regulations, which take effect in a month and a half (feb), they are doing all the things they will soon not be allowed to do. We bail them out, and they come after us. It makes me SO MAD!!!!! Yeah, they paid us back…. at 3.25%! We should of traded cash for stock, we could have gotten at least 10 billion back for every 5 billion invested… check stock prices for the banks from last year versus now. (for example, BoA was at 12$, now it’s at 28… that’s 28 billion back for every 12 billion invested, or 117%!!!!! Guess who got the money instead? If you guessed fat cat executives and shareholders, you are correct!) Stupid government can’t even loan money right.
AT&T Universal Card insists they notified me of interest rate hike and opt out in Oct09. Never received notice. My rates have doubled. Their “help” lines all tell my me there’s nothing they can do. Anyone hear of any current lawsuits against this credit card co?
[...] Credit Card Payment Calculator "Chase Credit Card Payment Calculator" image from: http://milkyourmoney.com/2008/02/21/my-credit-card-interest-rate-raised-for-no-reason/ "Chase Credit Card Payment Calculator" on [...]
US Bank decided out of the blue to raise my rate from ll% to l6% interest. I have credit scores of 744 and thereabouts. I am never late with a payment – I have not used that particular card for about three or four months. I guess the best way to look at this is I just won’t use that card unless I absolutely need to and my balance should steadily decrease. Their loss in the long run I believe. Perhaps that is what they are trying to accomplish!
This is excellent information for those of us with credit cards. I have recently been informed my B of A interest rates are going to 27%, after requesting a report of my credit rating which they say was used to base the increase on, I didn’t see a single late fee from any creditor for over 3 years – they use this ploy so people won’t bother following up on their credit report. I now hear that this is a common tactic B of A is doing to recoup from their companys failed mortgage loans.
Why should other customers be forced to pay for the B of A’s business loses?
Shame on B of A, I am applying for a consolidation loan for all of my current credit cards so I won’t have to play these games.