Another way the CC get us to pay more !!!

[christina33]

I saw this in a newpaper this morning and thought I would share it with you guys






Michigan business
SUSAN TOMPOR: Beware of credit card interest rate that can double

June 11, 2006

Email this Print this BY SUSAN TOMPOR

FREE PRESS COLUMNIST




What raises rates

The rules vary by credit card company, but consumers should realize that some issuers can raise your rates if:




Your credit score gets worse.




You've paid your mortgage, car loan, other credit card bills or other creditors late.




You've gone over your credit limit.




You've bounced a payment check to the credit card company.




You're carrying too much debt.




You've got too much available credit.




You've gotten more credit cards.



Susan Tompor




Can a credit card really charge 30% or more?

You bet. Consumers might think credit card companies could never charge 30% or more on a credit card.



And many years ago, many states had placed some caps or limits on credit card rates.



But various court decisions in the 1990s led to a change in the business.



Today, many credit card companies are headquartered in a few states, including Delaware and South Dakota, where the rules enable the card issuers to charge high rates to consumers across the country.



"The short answer is there's no cap," said Travis Plunkett, legislative director for the Consumer Federation of America in Washington, D.C.



Susan Tompor



A 40-year-old Oak Park mom got a shock when she opened her credit card bill.

Ida Warshay discovered that J.P. Morgan Chase & Co., the nation's second-largest credit card issuer, was charging her an annual rate of 29.99% instead of 15.49%.

She didn't get a phone call. She didn't get a letter. Some bigger numbers just popped up on her monthly statement. And for the first month, at least, she didn't even spot that her credit card company had nearly doubled her rate.

It's a little story that consumers should remember as they pull out their credit cards. They may not have those bargain-basement interest rates anymore.

And you may not know it.

Sure, by now, most of us know that many credit card companies can hit us with extra fees and charge us higher rates if we're often late making payments.

"Many consumers assume that paying late is the only way this can happen to them," said Linda Sherry, a spokeswoman for Consumer Action, a national nonprofit group that monitors credit card troubles.

But a study by San Francisco-based Consumer Action last summer concluded that anyone -- not just people with financial difficulties -- could be hit with a much higher rate.

Using too much credit

What's called a universal default clause can give many credit card issuers the right to impose a higher interest rate on your card -- including past purchases -- based on the way you handle other credit accounts.

Nearly half of banks had such universal default clauses, according to last year's survey. A 2006 survey is to be released this year.

In Warshay's case, she was later told by mail that Chase's decision was based on a review of information in her credit report, including how much credit she was carrying in general on other cards.

The decision didn't reflect late payments or missed payments on the Chase card or other credit cards.

Did you know that in many cases a credit card issuer can raise your rate if you've started using what the issuer might deem as too much credit? Or say your outstanding balances started going up quickly? Or say you had too many revolving accounts with high balances?

I saw this warning in an offer for a Chase Southwest Airlines Rapid Rewards Visa: "We reserve the right to change the account terms (including APRs) at any time for any reason."

Any time? For any reason?

"For example," the notice read, "we may change the terms based on information in your credit report, such as the number of other credit card accounts you have and their balances."

The same notice appears in other Chase offers, including one for the new BP Visa.

Based on horror stories she's heard from other consumers, Sherry warns that consumers shouldn't use more than 75% of their available lines of credit.

Rubbing salt in the wound

The sting that consumers are feeling from these rate boosts is made worse by the fact that most penalty rates are variable and go up with the prime rate.

Chase credit cards have a maximum default rate of 23.99% plus prime. The prime rate is now 8%. So the penalty rate can be as high as 31.99%.

Warshay said her rate changed on the bill she got in April, but she only noticed it on another bill in May. The minimum payment went up from $112 in March, when the rate was 15.49%, to $196 by the May bill, when the rate was nearly double. And her finance charges alone went up from $62.50 in March to $140.16 in May.

Yes, she had charged more. But the outstanding balances didn't double. The balance was $4,967 in March and $5,669 in May. The card had a $10,000 credit limit.

"I couldn't believe it," she said.

So she called the bank.

And she was stunned that the reason for the rate increase was high balances on her other credit cards.

"Needless to say, I was livid," said Warshay, who has three children, ages 11, 8 and 5.

She was laid off from her job in March. Her husband is still working and they're paying their bills. She declined to say how much she owes on other cards.

She never even dreamed that her credit card company would randomly look at her credit report.

But credit card companies can -- and do -- frequently look at your credit report, said Mark Munzenberger, training manager for GreenPath Debt Solutions, a nonprofit credit counseling firm based in Farmington Hills.

And many credit card issuers will slap on higher interest rates when consumers look like a higher risk.

Travis Plunkett, legislative director for the Consumer Federation of America, charged that credit card companies are using these clauses as an opportunity to gouge consumers.

"It's a selfish policy that will only increase the financial pain that consumers feel," Plunkett said.

Keeping an eye out

What's also troubling is that many consumers wouldn't know they've been hit with a higher rate unless they study their statements.

Chase wouldn't comment directly on Warshay's account. The company would only say that it does periodically review a customer's credit report.

After I contacted Chase about Warshay's story, Chase told Warshay that the company was willing to send her a $208.59 check to make up the difference in interest paid between the higher interest rate that she paid in the past few months and her old rate. She accepted that offer.

Chase also told her in a letter that she was sent a "change-in-terms notice" in January. That notice advised her that her card would carry a rate of prime plus 23.99% for purchases and cash advances beginning on March 1.

The notice is a pamphlet filled with small print, many details and contract-like language.

Warshay doesn't remember getting the pamphlet. But a copy of that notice showed that the fine print required her to notify the company by Feb. 20 in writing if she wished to reject the terms.

[starsapphire]

Chase is notorious for ratejacking. There's a couple of credit cards that don't ratejack, Bank of America is one. I can't remember what the other one is. Most credit cards from credit unions don't ratejack.

[Telephus44]

I've posted my story on here last fall - DH had a Chase card, and we got one of the "pamphlets" saying that his rate was being changed from 15.49% to 33.49%. Needless to say, we did have a one month notice (it came in October and took effective the first billing cycle that included Dec 1st) so of the $7,000 he owed we paid $4,000 in cash and opened up a new card with Citibank with a 0% balance transfer and moved the rest.

Once the card was paid off, Chase upped his limit from $7800 to $17,700. Great, so we could charge a small fortune and pay 33.49% interest on it!

The only other time we've used them since was to take advantage of a balance transfer offer. We could transfer balances to the Chase card at 5.9%. Since the limit we were granted on the Citibank card was small in comparison with some of DH's other cards, we took advantage of the Chase offer to transfer the entire balance from his Discover card.

Right now, we're down to a total of $3,000 owed across all cards, and this includes $800 for a class DH needed to take for his degree and had to pay for before pay day. We should have the total amount paid off by the end of this month.

I tell everyone I know about Chase and how evil they are - when DH called, they said it was because he owed a lot of money - he was was not late on payments or over the limit.

[chatterweb]

Wierd, I have applied and carry 5 chase cards and my auto loan is with Chase. I carry 0% interest on all balances, the car loan is for the 60 month term, the others are intro rates (15 months)
I have never (knock on wood) paid a finance charge, late fee, or an interest rate on any credit card.
But, I have a system, and I always make it the rule to pay off the intro balances 1-2 months before the rate change is to apply.
I just paid off a Chase card that I applied for last September, 0% until July 2006- as of now the balance is zero.
The one company I do not like is Capital One.

[treeluva]

capital one is EVIL. I never had a Capital One card, but my exhusband did, (totally gotten behind my back as well!) and it was insane. He had to pay 20 dollars a month just for the HAVING THE CARD. The interest rate was at like 24% to START. He was SUCH AN IDIOT for getting that card!

That being said, I dont think it is wrong for credit card compays to review your credit report. Having high debt to income ratio does make you a higher risk... although charging more interest only makes it more likely that you will default, so raising your rates when you have not been late really does not make any sense.

[babetteq]

I think credit cards in general are evil. I try to live without them as much as possible.