Credit Card Issues

**ChocolateLover** · 03-31-2010, 07:49 PM

Hi Everyone,

I'm new to the village and I have an issue.
My husband and I are in the process of the "Total Money Makeover". We've been on it since Aug 09 and are doing pretty well.

The other day we received a credit card payment bill which the interest rate was 8% now all of a sudden went to 25%. We've always been on time and we've always paid a little more than was requested.

The only thing that we can think of why they raised the interest rate was because as we pay off other credit cards, they are lowering the total credit limit. So, now if you look at our history, it looks like we are maxed out.

What do you suggest we do? We tried to get them to lower the interest rate back down to where it was and they said no. We then told them to just close the account out and they said if we do that then you will be paying 5% rather than 2% and we will not lower your interest rate.

So, what are our options? Try to get a loan through the credit union for the full amount. We will try this but not sure we will be able to. Anything else? We do not have the money to be making payments over $400 dollars a month. If we had the money we would just pay it off but we don't. We need to have food on the table and a house to live in.

Any suggestions would be wonderful. Thanks for listening. And I just wanted to say "Thank you" to everyone. You are always so nice and have great suggestions. I've been a lurker for awhile and always enjoy reading what others have to say.

**krbshappy71** · 03-31-2010, 08:01 PM

If you post your bills and income we can help you see where you might be able to cut back to save more money. It helped me, anyhow, my posting is titled "the krbs financial dream" if you would like to see what others suggested to me.

If your credit is ok you can shop around for a 0% or low interest card to move that balance to. I did that with one just until my tax return came in and then I paid it off. I wouldn't close the account, it isn't costing you to have it open. (unless they are also charging you an annual fee of course) I've read some places do raise the interest rate if you close the account.

If you are doing the total money makeover, are you to the point of snowballing yet? If so, perhaps switch the snowball focus to this card to get them off your head? I agree, $400 is too much a month!

**Russ** · 03-31-2010, 08:01 PM

do not pay them before you eat or put a roof over your head.

As for why they raised it... because they can. The main reason is due to the high losses by these companies and the new regulations ready to take effect, they are passing the costs on to consumers.

Unfortunately, that is what a lot of folks here are seeing, higher rates.

**ChocolateLover** · 03-31-2010, 08:09 PM

Thanks for the quick replies. We've got a budget set up right now but I'd rather not post it at the moment. We don't really have any where else to cut from.

Yes, we are in the process of snowballing but its one of our higher cards so, its not the one being snow balled at the moment. Sure we could switch it up, and put this one first, but unfortunately, that means that we are stuck paying the 25% and we can't afford that payment right now.

As for a 0% or low interest card, we've been looking but really can't find any right now. They are all starting off with high interest rates because of the debt we have on our other cards.

I guess our only option at this point is to try and get a loan from a local credit union with a lower interest rate.

Is there any time that you would consider not paying them? What about settling? Or is that only when you take on bankruptcy? We DO NOT want to do that. How do we just get them to lower it back down to a reasonable interest rate? Sigh... I know, now with the new laws coming out, they are just going to keep getting worse and worse.

Thanks.

**Greebo** · 03-31-2010, 09:02 PM

You consider not paying them if you cannot maintain your four walls and pay them.

If you can make the payment, without jeopardizing your four walls, you do so. After all, like it or not, this is what you signed up for.

Now if you can't make a FULL payment, then you can go "pro rata" with your debts. Dave talks about that in the TMMO book and in more detail, IIRC, in "Financial Peace Revisited"

**frugalfranny** · 04-01-2010, 12:22 AM

Originally Posted by ChocolateLover

What do you suggest we do? We tried to get them to lower the interest rate back down to where it was and they said no. We then told them to just close the account out and they said if we do that then you will be paying 5% rather than 2% and we will not lower your interest rate.

Any suggestions would be wonderful. Thanks for listening. And I just wanted to say "Thank you" to everyone. You are always so nice and have great suggestions. I've been a lurker for awhile and always enjoy reading what others have to say.

Hey....if I am reading this right.......and Greebo will jump in and tell me if I am not......(then it is mistake number 2 for me!!)

BUT.......

IF YOU CLOSE THE ACCT. now........don't you get to then pay the card off at the 8% rate??..........THOUGH you might be paying a 5% of the total amt. due..........but it sure beats 25% interest. Can you swing the 5% payment of that total? Can you 'juggle' something to make it?

**ncarr** · 04-01-2010, 10:03 AM

I thought under the new CARD legislation you could reject the rate increase and close the account. Is that right? I would look into it.

**Greebo** · 04-01-2010, 10:04 AM

I think that's within a certain time period after being notified - but personally, IF the budget can absorb the extra payment, I'd close the card anyway. Paying 5% of the balance as part of the min payment is 150% better than paying 2%.

**craftypam** · 04-01-2010, 10:13 AM

I was thinking the same thing ff. We need to fight these cc companies when we can and close accounts when they jack up the rates for no reason other than their greedy little selves. Banks got bailed out with our money and now they are raising their rates to get more of it. HOW DARE THEY!!!! I know Russ; because they can.

I'm not sure if this will work the way things are with cc finding more ways to get us; but could you balance transfer. My ds transfered his balance from a bank card to a credit union credit card and has a fixed rate of 9%. Maybe you could find a cc that has a lower or 0% for a year. You still have to pay transfer fee. Still cheaper than 25%. Good luck and let us know what happens

**Preston** · 04-01-2010, 02:17 PM

Originally Posted by craftypam

I was thinking the same thing ff. We need to fight these cc companies when we can and close accounts when they jack up the rates for no reason other than their greedy little selves. Banks got bailed out with our money and now they are raising their rates to get more of it. HOW DARE THEY!!!! I know Russ; because they can.

s

This is pretty simple. We fight them by no longer using their "services."

But I also believe they should be reigned in and their practices have been abusive. It's had to do anything when you keep getting socked with fees, higher interest, etc.

**lparker** · 04-01-2010, 08:48 PM

"We then told them to just close the account out and they said if we do that then you will be paying 5% rather than 2% and we will not lower your interest rate."

I can see the minimum payment going up...BUT not lowering the interest rate??? Thought that wasn't legal now.

That said, if you don't worry about your credit score and don't mind harassing phone calls for a while, don't pay them for 3 months. Unless they are really bad, they will offer you better terms as in a payment plan. You have to hang in there for terms you can live with. If they don't want to work with you, go bankrupt. I don't care what anyone says. If someone is injuring me (as in obscene credit rates), I'll fight back. The debt, I contracted for...not the interest rate.

**craftypam** · 04-01-2010, 08:51 PM

Originally Posted by Preston

This is pretty simple. We fight them by no longer using their "services."

But I also believe they should be reigned in and their practices have been abusive. It's had to do anything when you keep getting socked with fees, higher interest, etc.

I agree with you. I am not in that boat of paying interest, but those who are shouldn't have to deal with their cra? KWIM?

**NikoSan999** · 04-06-2010, 09:52 AM

You say you received this the "other day". Was this before or after the new laws took effect? Curious who is the credit card thru if you don't mind my asking..
New laws

Quote
Consumers will be glad to know that there will be no rate increases for their existing credit balance - except when they fail to meet their payment 60 days after the due date.

1. Retroactive rate increases

Issuers can't raise rates on an existing balance unless a promotional rate expired, the variable indexed rate increased or you paid late by 60 days or more. No longer will they be able to punish borrowers for late payments on unrelated accounts under the practice of universal default or due to "anytime, any reason" clauses.
If the cardholder does trigger the default rate because of a 60-day delinquency, the bank must restore the lower rate once the cardholder demonstrates six months of consecutive on-time payments. This provision takes effect in August 2009.
In general, rates can't be raised in the first year after issuance, and promotional rates must last at least six months. Exceptions include expiration of a promotional rate, termination or completion of a workout plan, a change in the index rate or a 60-day delinquency.
Caveat: Issuers can raise rates at any time for any reason on new balances with 45 days' advance notice. Cardholders will still need to read correspondence from their creditors.
2. More advance notice of rate hikes

Consumers get 45 days' notice before key contract changes take effect, including rate increases. Under the current Truth in Lending Act, cardholders only receive a 15-day heads up. This change takes effect Aug. 20, 2009.