Credit Card Execs Defend Rate Policies

zippyjuan · 12-04-2007, 01:20 PM

My own credit card company changed the due date of my payment to an earlier one and my last two payments were posted as two days late. They charged me a late fee and I just noticed that the interest rate listed for my card is over 30%!! I always have paid ontime and in full prior to this. Good thing I don't carry a balance- at 30% that could add up a lot of money very quickly!

Quote:

"Annual Percentage Rate for This Billing Period: 30.8%"

The balance on the bill was only $36 and the privious one about $80. With Christmas shopping, my next one will be higher. I have an excellent credit score (last time I looked).

http://my.earthlink.net/article/top?...1204-444202212

Quote:

Credit Card Execs Defend Rate Policies
By DIBYA SARKAR (AP Business Writer)
From Associated Press
December 04, 2007 1:17 PM EST
WASHINGTON - Credit-card executives on Tuesday deflected congressional criticism of their practice of using falling credit scores to charge customers higher interest rates.

Industry critics say it's another example of abusive, confusing credit-card practices that can push consumers deeper into debt.

Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, said customers who consistently pay on time are getting whacked by credit-card issuers that raise such rates without an adequate warning or a clear notice.

"The bottom line for me is this: 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," he said Tuesday.

Levin is holding out the club of possible legislation to spur voluntary changes by the industry.

But executives from Bank of America Corp. and Discover Financial Services LLC. told the subcommittee that a credit score is one of several factors in determining whether to increase a customer's interest rate.

"It's important criteria for how to manage risk and pricing," said Roger Hochschild, Discover's president and chief operating officer.

Bruce Hammonds, president of Bank of America Card Services, said his bank also considers customer behavior on an account and their debt to others, in addition to credit scores.

But it's the behavior of credit-card issuers that prompted several consumers to testify before Levin's subcommittee about not being informed when their rates were hiked.

Janet Hard of Freeland, Mich., said her Discover credit-card rate nearly tripled without adequate notice and that issuers send "deliberately misleading and confusing" information.

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.

Levin's subcommittee, which has been investigating the industry, looked at how credit-card issuers raise consumers' rates, to as high as 30 percent, when their so-called FICO credit scores decline - even if they've paid credit-card bills regularly and promptly. In many cases, consumers have little notice of the increased rate, which are automatically triggered by declines in FICO scores for reasons left unexplained, the subcommittee found.

In some cases, just opening another account, such as a department store credit card, could trigger the downgrade in credit score.

In one of the cases cited by the subcommittee, Marjorie Hancock of Arlington, Mass., wound up with interest rates on her four Bank of America credit cards of 8 percent, 14 percent, 19 percent and 27 percent, even though her credit risk is the same for all four.

Ken Clayton, managing director of card policy for the American Bankers Association, which represents the banking industry, said Monday: "Costs for nearly every product can change, be it because consumer's risk profiles change or because underlying costs change. Credit cards are no different."

Five big financial companies - Discover, Bank of America., Citigroup Inc., JPMorgan Chase & Co. and Capital One Financial Corp. - issue around 80 percent of U.S. credit cards, according to the subcommittee. A Capital One official also testified at Tuesday's hearing.

Citigroup, JPMorgan Chase and Capital One said they will discontinue the practice; Citigroup's change already is in place and JPMorgan Chase's will take effect in March. But Levin says legislation may still be needed to get other companies to do the same.

Larry DiRita, a spokesman for Bank of America, said its customers "have the right to say 'no' to an increase."

Jeffbx · 12-05-2007, 09:11 AM

If any of my card companies tried that, I'd call & have them fix it & if they didn't I'd drop them. That's just BS

zippyjuan · 12-05-2007, 12:42 PM

I looked closer at my statement and am trying to figure out where the 30% figure comes from. No interest was charged, but a $15 late fee plus a $1.50 "minimum Finance Charge" which raised my payment due from $21.60 to $36.60. That is a pretty high percent. The posted interest rate for purchases shows "18.74" which is still a bit high but since I pay in full, that is not really an issue.
The "APR For This Billing Period" is said to inluded fees and finance charges. I need to call them.

VTGreg · 12-05-2007, 01:03 PM

Quote:

Originally Posted by zippyjuan

I looked closer at my statement and am trying to figure out where the 30% figure comes from. No interest was charged, but a $15 late fee plus a $1.50 "minimum Finance Charge" which raised my payment due from $21.60 to $36.60. That is a pretty high percent. The posted interest rate for purchases shows "18.74" which is still a bit high but since I pay in full, that is not really an issue.
The "APR For This Billing Period" is said to inluded fees and finance charges. I need to call them.

Typically if you are always on time with your payments you can call them and work something out. I know there have been times where I have forgotten to make a payment and they were able to refund the late fee, finance charge or both. As long as your account is in good standing and you don't have a history of negligence they are relatively accomadating.

zippyjuan · 12-27-2007, 09:50 PM

OK- I think I have had it with these guys (Bank of America). I know I sent in my payment on time again and they still said it was two days late- and hit me with a $39 late fee on a $38 bill- over 100%! Plus a $5.46 finance charge. I just received my latest bill today and it is due in seven days. If someone was out of town for a couple of days there, they would probably be facing another late fee.

My main bank was just taken over by Wachovia so I will check them out. These fees are getting rediculous. I always pay in full and on time. I tried calling but they said they cannot do anything. I pay them with a check and they do not return them so I have no way to show when it was actually written and processed. I show it written on the 1st and they posted it on the 7th. No way it takes a week to get there.

gwilks98 · 12-27-2007, 10:36 PM

Quote:

Originally Posted by Jeffbx

If any of my card companies tried that, I'd call & have them fix it & if they didn't I'd drop them. That's just BS

that's just how they get you. Your credit score is also based on credit history. You cancel a card, you lose that history; your score lowers.

They know this.

It's getting harder and harder to use credit when the chips are stacked against me.

zippyjuan · 12-27-2007, 11:54 PM

I don't think you lose the history of a credit card if you cancel it. It will still show up on the credit report- only showing the account closed. Closed by you is better than to say closed by the creditor. I have had this card a very long time and don't really have any other ones (except a Macy's card I opened last year for the extra disccont but haven't used it since). I have already purchased my condo and don't forsee buying a car for a while so it should not be bad for my credit rating to close this one (after it is paid off and replaced).

Maybe it could make a difference if it is a long held card:
http://money.aol.com/bankrate/credit...29154909990002

Quote:

Older credit is better If you do cancel a card, you can compound your error even further by canceling the card that you've had the longest period of time and on which you've been making regular payments. By canceling an old card, the length of your credit history on open accounts will grow shorter. Both the FICO score and the VantageScore credit-scoring formulas take into account the credit histories of even closed accounts in assessing how long you've been managing credit. However, according to Watts, "that history will finally disappear from the formula when a credit bureau of its own accord removes old credit account information from your credit file."

Barrett Burns, CEO and president of VantageScore Solutions (the company formed by the credit bureaus Equifax, Experian and TransUnion), agrees, but cautions that the scoring algorithm "is weighted such that if you maintain that older account, you're better off because it goes to a pattern of payment history." Nevertheless, he says, if it's an older account that you don't use, and you're paying fees on it, "you're probably better off closing it out for privacy rather than credit score reasons."

InfiniteNothing · 12-28-2007, 08:39 AM

Yeah. Seems stupid but that's what I've always heard. I say keep it just in case.

VTGreg · 12-28-2007, 08:42 PM

Quote:

Originally Posted by zippyjuan

I don't think you lose the history of a credit card if you cancel it. It will still show up on the credit report- only showing the account closed. Closed by you is better than to say closed by the creditor. I have had this card a very long time and don't really have any other ones (except a Macy's card I opened last year for the extra disccont but haven't used it since). I have already purchased my condo and don't forsee buying a car for a while so it should not be bad for my credit rating to close this one (after it is paid off and replaced).

Maybe it could make a difference if it is a long held card:
http://money.aol.com/bankrate/credit...29154909990002

Yeah, I wouldn't cancel the card even if you don't want to use it anymore. Unless it has an annual fee, just either set the card aside and don't carry it or actually cut it up but don't close the account. Then just get another card from another company to use.

12-28-2007, 08:39 AM	#8
InfiniteNothing Chief of Naval Operations Join Date: Aug 2002 Location: San Diego Posts: 10,086	Yeah. Seems stupid but that's what I've always heard. I say keep it just in case. __________________ As for our common defense, we reject as false the choice between our safety and our ideals.

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12-05-2007, 09:11 AM	#2
Jeffbx Fleet Admiral Join Date: Mar 2000 Location: Michigan Posts: 9,390	If any of my card companies tried that, I'd call & have them fix it & if they didn't I'd drop them. That's just BS

12-05-2007, 12:42 PM	#3
zippyjuan Picture of the Day Guru Join Date: Oct 2002 Location: Sunny San Diego Posts: 8,756	I looked closer at my statement and am trying to figure out where the 30% figure comes from. No interest was charged, but a $15 late fee plus a $1.50 "minimum Finance Charge" which raised my payment due from $21.60 to $36.60. That is a pretty high percent. The posted interest rate for purchases shows "18.74" which is still a bit high but since I pay in full, that is not really an issue. The "APR For This Billing Period" is said to inluded fees and finance charges. I need to call them.

12-27-2007, 09:50 PM	#5
zippyjuan Picture of the Day Guru Join Date: Oct 2002 Location: Sunny San Diego Posts: 8,756	OK- I think I have had it with these guys (Bank of America). I know I sent in my payment on time again and they still said it was two days late- and hit me with a $39 late fee on a $38 bill- over 100%! Plus a $5.46 finance charge. I just received my latest bill today and it is due in seven days. If someone was out of town for a couple of days there, they would probably be facing another late fee. My main bank was just taken over by Wachovia so I will check them out. These fees are getting rediculous. I always pay in full and on time. I tried calling but they said they cannot do anything. I pay them with a check and they do not return them so I have no way to show when it was actually written and processed. I show it written on the 1st and they posted it on the 7th. No way it takes a week to get there.

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