Upset that your credit card company changed the rules?
January 24th, 2009 | by mbhunter |Apparently Chase has taken some of the fun out of their balance transfer accounts. Some of these low-APR accounts now have raised minimum payment requirements (from 2% of the balance to 5%) and raised monthly fees to $10 per month from nothing per month.
Would you be a little ticked if this happened to you? I know I’d be ticked.
But it’s perfectly within Chase’s power to do this. It’s a business decision that makes a lot of sense for them. The user agreement states clearly that they can change the terms, including APR, fees, default rate, and more, at any time, for any reason. Chase saw an opportunity to get extra revenue from people who are already over a barrel, and who may have fewer options available to them than they did ever six months ago.
There are no guarantees that the rate you start with will stay that way, or that you will have no additional fees tacked on. People who are so close to the bone that they cannot afford more than double the payments that they were making will see their APR skyrocket after they miss a payment. This is what Chase and other credit card companies want: to turn marginally profitable customers into really profitable ones.
Larry Winget, in his new book People Are Idiots And I Can Prove It!, goes so far as to say that people who are surprised when their APR goes through the roof when they miss a payment or are late are idiots. “While the print is small, the rules and regulations are clearly laid out in black and white — all you have to do is read them,” he writes.
In any case, changes in terms and conditions for credit cards can happen, and they are happening. A good debt reduction tip is to plan for changes to your credit card terms by dedicating part of your emergency fund to it. Do this while trying to find a better deal elsewhere.
Look out for yourselves, because the credit card issuers are certainly looking out for themselves.
(Note: This post was included in the Carnival of Personal Finance over at Taking Charge. Thanks!)
6 Responses to “Upset that your credit card company changed the rules?”
By poor boomer on Jan 24, 2009 | Reply
Who can afford an emergency fund on an income of $1,000 per month?
By Chris on Jan 24, 2009 | Reply
Poor boomer, why not make more than $1000 per month? Any full time job would pay more than that.
By debtmaven on Jan 25, 2009 | Reply
That is so true! I just opened a discover card recently and have been mulling over whether or not I should try and move more of my 10% personal line of credit (they just raised the rates on me a few months ago) to a lower rate credit card (provided there are offers still out there).
With all the uncertainty and upset in the credit world, I have decided to stay where I’m at and keep it at 3 individual debts (an SBA loan, a line of credit, and discover). I don’t know if I could do well at paying off my existing debt any faster if I had a 4th one and a minimum payment doubled, nor if the interest rate went up significantly for any of them.
I *am* trying to keep on top of paying every single bill (not just credit cards) on time, to prevent any possible rate increases in any other place (which I also hear is a possibility). It’s getting back out there!
By Michael @ The Life Insurance Insider on Jan 26, 2009 | Reply
This is the main reason I finally closed all my credit card accounts and switched to the debit card. A few airline miles or reward points is not worth the fact that I was helping to support an industry that has gone beyond simply making money by loaning out money and collecting interest. Now it seems like they truly think they can abuse people to increase their revenues and there is nothing anyone can do about it. It’s legal but that doesn’t make it right.
By David on Jan 27, 2009 | Reply
One thing I didn’t realize until recently is how drastically balance transfer rates go up if you miss a payment.
Luckily it was while I was researching balance transfer terms, so I wasn’t affected.
But for most of the cards I looked into, the APR jumps to anywhere from 25%-40%. This could be a crippling mistake for people, especially if they’ve transferred a high balance.
By Grace on Feb 2, 2009 | Reply
One of my credit cards is with Chase. Another (WAMU) is moving over to Chase. I have done nothing but make payments on these cards for the past two years (actually the cards themselves are in the ice-cube tray at the back of my refrigerator). I don’t like to think what my interest rate would jump to if I missed a payment, but at least I’d have a sense of being at fault. Even a move to increase the minimum payment would be alright with me since I try to make larger than minimum payments each month. But a $10 a month “service” fee out of the blue? That would really tick me off. It hasn’t happened yet, but I’m already checking out options if they try that with my accounts.