Credit Cards Have Lost Our Trust

Can you ever trust a credit card company again?

When President Obama, in his inaugural address said it was time to put away childish things, could he have been referring to credit cards and credit card debt?

It may appear that just such advice might be very appropriate.

In November, 2008, Chase decided that it would no longer honor the rates of some of its “Life of the Loan” balance transfers and advances. In other words, you sign on for a 3.99% “Life of the Loan” transfer and until that balance is paid off, assuming you are current and timely on your payments, your rate remains 3.99% regardless of what happens to credit rates. Well Chase decided that it was a good time to just stop honoring those terms and raise people’s rates – EVEN THE GOOD CUSTOMERS who pay on time. In addition, Chase decided to add on a $10 dollar monthly “finance fee” to, as I understand, about 400,000 customers. Yes, $10 per month, in addition to your payment. That’s a cool 4 million dollars a month free money for Chase, and a defacto rate change for the customers.

Chase is now looking at a class action lawsuit for these and other practices.

In January, Citi bank sent me a notice that they too would drop any agreements we had to “Life of the Loan” advances and that my balance would be subject to another (higher) interest rate as of October 1st, or there abouts.

Today, I received a notice in the mail from Discover Card to its cardholders that any fixed rates were void and would become prime +15%, or currently about 19.24%, variable annual interest rates. So your fixed rate is going variable – thank you very much. Of course Discover was at least smart enough to continue to honor any previous special rates – probably until they see how Chase fares.

I had decided yesterday that I would keep my Discover account since they hadn’t pulled any shenanigans with the rates. I guess I was wrong.

What the banks and credit firms are really losing sight of here is that the economic crisis, which they contributed to, will eventually be over. But the signal they are sending is — “You can’t trust us”. Although they may succeed in making some fast cash. The very people they are hoping to count on in the future – the credit worthy who pay on time – might not be back. Many people will no doubt begin to understand that they can no longer trust credit card companies and will cease to be customers.

These companies, who are receiving public money to bail them out, are essentially cutting their own throats over the long term.

I personally am done with credit cards.

Soon we will see how the courts view this. Raising rates on old balances is essentially a breach of contract and trust. You offer me a certain rate and I make spending decisions based on those rates. You then decide to raise my rates on that purchase after the fact, even though I am paying and acting as agreed on my part.

What is to keep a company from offering you a 2.5% “Life of the Loan” transfer deal and then, as soon as it’s inked, raising your new loan rate to 20%? Nothing, I guess.

There has been no better time nor a better reason to pay off the credit cards and end our relationships with these banks who obviously cannot run their business or our economy to begin with.

I hope the courts see it the same way, but in any case, my trust has been used up and I am glad to be done with them.

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5 Responses to Credit Cards Have Lost Our Trust

  1. Loan Guy says:

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  2. mike alan says:

    Pretty cool post. I just came by your blog and wanted to say that I have really enjoyed browsing your posts.

    Any way I’ll be subscribing to your feed and I hope you post again soon!

  3. thelastsocialist says:

    Absolutely. The CC Companies are scrambling to fortify their positions before the laws come to “help” the consumers. And, as you say, the companies are punishing EVERYONE. Just a complete lack of foresight and integrity on their part. Thanks!

  4. Anonymous says:

    One of the reasons why all of the credit card companies are changing your rates are because of new federal regulations that will be effective soon. Once the new regulations take affect they can no longer change your fixed interest rate depending on your risk. Essentially all of the good customers are getting screwed because the gov’t won’t let the banks change the rates on the bad customers when the risk of lending them money goes up. This is also why a lot of companies are converting customers to variable rates intead of fixed to get around the new regulations.

  5. Thanks for the info. With all the crazy credit card websites out there giving bad information it is good to see someone that knows what they are talking about.

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