New rules encourage credit card issuers to raise rates and fees
Filed under: Banks, Credit, Debt, Credit Cards
Millions of Americans will be paying a whole lot more interest on their credit card balances as credit card companies rushed to raise raise rates before the first changes in credit laws take effect this week. Starting this week credit card issuers must mail bills 21 days rather than 14 days in advance and they must give 45 days notice before raising interest rates. Before the Credit Card Accountability Responsibility and Disclosure Act (CARD) went into effect credit card companies only had to give a 15-day notice of a rate increase.
Often by the time people received the notice there wasn't much time to protest. When you do protest, you have only one of two options -- pay off the account or lock in the current rate and agree to close the account.
In the past few months credit card companies have been racing to raise interest rates on millions of credit card holders. People with cards from American Express, JP Morgan Chase, Citigroup, Discover, Capital One and others have been reporting increases even if they've never made a late payment and have excellent credit scores. Anyone who carries balances from month to month will see the credit card costs increase.JP Morgan Chase just changed the rules on people carrying balances of $5,000 or more. Rather than being required to pay 2.5% of their balances each month they must now pay 5%.
For people who have lost their job this just puts even more strain on their budget and will push them even faster toward bankruptcy. Individual bankruptcies are up 36% for the first half of this year compared to last year.
As credit card companies make these changes their default rates continue to go up. Bank of America reports the highest default rate at 13.8%. Others including Chase, Citigroup, Capital One, Discover and American Express report default rates at around 10%.
Many credit card issuers are getting rid of fixed rate cards completely and instead offering variable rate cards set to an index. That way they don't have to send notices at all. As the index rate goes up so does the credit card rate. That's another way they can avoid the protections in the new law.
Now that the first changes have gone into effect you can expect credit card companies to look for ways to avoid the law changes that takes effect in February 2010. These include:
* A ban on marketing to students under age 21 unless their parent co-signs or the credit card company has proof the student earns enough to pay the bill.
* If there is a an interest rate hike it cannot be applied to an existing balance.
* If your card has balances at a variety of rates payment must apply to the portion with the highest rate.
* Many credit card companies charge fees if you go over your balance. Under the new law they must allow you to opt out of this practice. You can insist that instead the company refuses a charge.
* Double cycle billing will be banned. With this practice credit card companies used to use your average daily balance from the current and previous month to calculate finance charges.
Changes to gift cards will take effect next summer. After the changes take effect gift cards must be good for at least five years. Right now many expire after one year and some in even less time. Also there will be limits on the fees that can be charged on dormant or inactive gift cards.
Also expect to see more fees added on to your account. For example, some cards are starting to charge a fee to reinstate rewards points if you are late on a bill. I'm sure they'll find other fee innovations before the new law takes effect in February 2010.
Work to pay off your balances. If not, you can be certain that by February 2010 you're credit cards will be costing you even more in interest and fees than they do today.
Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Improving Your Credit Score."
Reader Comments (Page 1 of 1)
8-18-2009 @ 6:58AM
Alessandro Machi said...
How about you consider changing the title of your article to Credit Card companies use new law as a scapegoat for raising interest rates.
How about you mention the growing tide of unhappiness over Chase Bank's raising the monthly minimum payment on people how have never been late making a payment.
How about it?
http://www.daily-protest.com
http://www.bloggersagainstchase.com
http://www.robotsagainstchase.com
Reply
8-18-2009 @ 4:03PM
C.S said...
After 15 years with Chase, they have lost my business. Doubling my rate from 7.9% to a variable 14.9%. Asked what they could do for a long standing customer AND someone who always not only paid on time yet always doubled the amount due. I was told nothing they could do. That's total bull. I will not pay for mistakes made by others. Rewards should go to those who deserve and penalties to those who do not. AMEX is NOT raising my RATE and in fact they will benefit from CHASE forcing me to "opt" out (what idiot would accept the above ripoff ??) So my double payments will triple for AMEX, I will TRANSFER my balances to them and guess what CHASE you get nothing in return. You can chase me for the money now. I only prefer to be screwed by my partner.
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8-18-2009 @ 6:59AM
alessandro Machi said...
Chase bank isn't even allowing people to OPT OUT of their low interest rate loans that Chase is raising the monthly minimum payment on.
The only way to opt out is to call the PRO-ACTIVE division within Chase, pass an income sniff test, and then get a 5 year payoff deal.
Ironically, that will still end up costing some Chase Ban customers more than the 10 dollar a month fee as it forces customers to pay off the Chase Bank low interest rate card BEFORE higher interest rate debt.
Chase bank should be offering incentives to its customers to accept faster pay down methods, end of story.
http://www.changeinterms.com
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8-18-2009 @ 6:59AM
vahn said...
chase just wiped us out by raising my monthly bill another 600 dollars on a 14000 dollar account. chalk up another for obama .
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8-18-2009 @ 11:06AM
mrs.g.kempton said...
Chase is being very unfair to their good paying customers like me.This month's statement requires me to pay a $544.00 monthly payment when it only used to be $220.00.That is almost triple! I've never been late & I'm on a fix low balance transfer rate of 4.9 %.Are they trying to make it impossible for me to be able to pay, so they can erase my special transfer interest rate? What I do,if this amount is to high for me to budget? Any advice?
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8-18-2009 @ 3:32PM
Alessandro Machi said...
I wrote about the Pro-Active option on one of my Chase Bank Protest Blogs. Here is the link. http://daily-protest.blogspot.com/2009/07/chase-bank-offers-proactive-solutions.html
Reply
8-18-2009 @ 3:39PM
Alessandro Machi said...
Don't be afraid to put protest signs up, if not you, then who?
Daily-PROTEST.com
CHANGEINTERMS.com
ROBOTSagainstCHASE.com
BLOGGERSagainstCHASE.com
Reply
8-19-2009 @ 9:26PM
Joe said...
There's a new post on http://saygoodbyetocreditcarddebtforever.blogspot.com
about a guy who was just indicted on identity theft. This is a big issue with so many credit card accounts floating about.
Reply
8-20-2009 @ 10:15AM
Becky said...
Chase doubled my intrest rate and thank goodness I had enough to pay them off which I promptly did, Am Ex did too but never offered me an opt out option, I called and told them what I thought of all of them getting bail out money out money and then doing this to us and the rep agreed but of course her hands are tied, she did say she is a consumer too. Now after reading this article and knowing they have to offer an opt out I will opt out of Am Ex too!!! I am outraged.
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8-20-2009 @ 9:19AM
sandy said...
People click here to vote to put a cap on interest rates. This is not a scam. We need these votes. Please get involved it's easy, safe on pc and FREE. Just e-sign this petition to help stop credit card companies from destroying our lives!
If you have questions: email me at: AXEL4Q@AOL.COM
http://www.petitiononline.com/cccir299/petition.html
Reply
8-20-2009 @ 9:20AM
Sandy said...
People click here to vote to put a cap on interest rates. This is not a scam. We need these votes. Please get involved it's easy, safe on your pc and FREE. Just e-sign this petition to help stop credit card companies from destroying our lives!
If you have questions: email me at: AXEL4Q@AOL.COM
http://www.petitiononline.com/cccir299/petition.html
Reply
8-21-2009 @ 3:37PM
Chamonie said...
Basically I think that the government has placed restrictions on credit cards that were unneccesary. Credit card companies now have to get revenue where they can. Since the government is not allowing them to take from the "bad" customers, they have to change their terms affecting all customers. If people don't understand how credit cards work, then they shouldn't get credit cards. If they get credit cards anyway and end up owing fees, that is their fault. The "good" customers shouldn't have to pay because the "bad" customers aren't paying as they should.
Reply
8-22-2009 @ 5:02AM
Grays said...
wow. just wow. so our government gives these banks billions of tax dollars, and in return the banks jack up our interest rates. lolololol.
we got royally f*****
Reply
8-27-2009 @ 4:29AM
ManuelRC said...
I have Fixed Rate at 3.99%. The credit card company increase from 2% to 5% the capital. I called them and gave me the following options: First, Payment the increased amount of payment (my case from $210 to $498)......... or change my fixed rate to 7.99% to lower to 2% the capital. IS IT RIGHT?..........
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8-30-2009 @ 7:36PM
J. Williams said...
Screw them.. Max out and file bankruptcy.
Reply
9-27-2009 @ 9:02AM
brenda said...
yes,these people are crooks!!! i have the same situation,excellent credit,paid on time,never late,then i got slapped with almost triple payments.i just paid these creeps off yesterday.i paid them almost $10,000.00! i want nothing else to do with them.yes,i could have used the money for other things i need(new car,health care etc.) but i want OUT now!! they will not get another penny from me on this account.i am sure they will reward me by closing my account(damn if i care)! I feel sorry for Chase customers that can't pay these loan sharks off but that is the only way to be "FREE" of them.i have written everybody from the govenor to the White House and several lawyers in between,even the BBB.(waste of time).we need to voice our complaints to anyone that will listen and hope and pray Chase goes DOWN!! i will be the first one to laugh my ass off.They deserve the kind of treatment that we have gotten from them!!
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