Credit-Card Fees: the New Traps

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Credit-Card Fees: the New Traps - 2/21/2010 9:16:44 AM

Brain

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It doesn’t seem right that credit card companies can change the credit card terms to create the same or worse conditions that existed before credit card reforms were enacted.

Credit-Card Fees: the New Traps

Credit card companies are going to lose out on $12 billion a year thanks to a law that goes into effect Monday, but they’re already figuring out ways to make that money back—measures that could cost the average consumer even more. The Credit Card Accountability Responsibility and Disclosure Act, passed in May, requires cardholders to be notified of how long it would take to pay off their balance if they pay just the minimum each month, prevents them from going over their limit without a previous agreement to pay a penalty, and allows interest-rate increases on new purchases only. Banks are grumbling about the new rules, which come as many are still trying to rehabilitate their balance sheets in the wake of the financial crisis. To compensate, credit card companies will be raising annual rates and adding new fees. Citigroup, for example, now offers a card with a 10 percent interest rate—which spikes to 29 percent if the cardholder doesn’t pay on time.

http://online.wsj.com/article/SB10001424052748704804204575069374130248754.html?mod=WSJ_hpp_LEFTTopStories

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RE: Credit-Card Fees: the New Traps - 2/21/2010 9:26:34 AM

Musicmystery

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No, it doesn't seem right.

That's why Congress passed new legislation.

Yes, it sucks that the companies grabbed what they could before it took effect.

Unless people stop doing business with them, though, that's the rules.

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RE: Credit-Card Fees: the New Traps - 2/21/2010 10:07:18 AM

UncleNasty

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As I've said many times MM, the rules aren't followed much by creditors/lenders. As much as new "rules" may benefit consumers simply enforcing existing rules may be the bigger assistance. Alas, most consumers are simply ignorant of the rules and are not able to adequately raise the issues.

WSJ ran an article a couple of weeks ago about Freddy and Fannie beginning to audit mortgages they have purchased for underwriting flaws (read that as violations of federal lending regulations). Those with flaws/violations are being returned to originating lenders for repurchase. If the gov't is applying scrutiny to these things you gotta figure it has happened in significant numbers/percentages. Basically they aren't wanting to be stuck with the toxic assets.

Uncle Nasty

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RE: Credit-Card Fees: the New Traps - 2/21/2010 11:22:56 AM

DomImus

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I've lost count of the number of credit card applications I have received in the mail and summarily shredded over the years. Has to be at least a hundred and closer to several hundred. I open them and read them before I shred them just out of curiosity. I can't ever recall seeing one that did not state in fairly plain English that the credit card issuer could change the terms of the agreement at their discretion. I'm not defending the credit card companies for their practices but people would do well to actually read documents and agreements before signing them.

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"Regret for the things we did can be tempered by time; it is regret for the things we did not do that is inconsolable." Sidney J. harris

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RE: Credit-Card Fees: the New Traps - 2/21/2010 11:46:48 AM

AnimusRex

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I despise the credit card companies as much as anyone, but I also know that they prey upon those who buy into the consumerism addiction of wanting more and more, ever more.

But here's the thing- consumerism is the mother's milk of retailers who base their entire industry on people foolishly spending money they don't have; this ethic was built upon people's naive faith that the rules would be fair and that consumers would be given equal power with the sellers. That is, that rates would be reasonable, and terms relatively easy to comply with.

Now that people are realizing this is not the case, one of two things will happen. Either people will demand government intervene to restore power to the consumers, or consumers will simply leave the casino en masse once they realize the tables are rigged. Meaning, when credit card terms are usurious for long enough, consumers will slow down or even stop using them, except for the minority who are gullible or unlucky.

The first scenario is bad for credit card issuers, the second disaster for retailers. But probably the best for us all in the long run.

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RE: Credit-Card Fees: the New Traps - 2/21/2010 12:06:13 PM

Musicmystery

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I agree it's best.

I also doubt it will happen.

People will bitch, and then pay.

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RE: Credit-Card Fees: the New Traps - 2/21/2010 1:33:26 PM

Termyn8or

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"or consumers will simply leave the casino en masse once they realize the tables are rigged"

Well put. The other fact is that they are driving people broke. In my situation I don't have a real money problem at the moment but I have at my feet the task of writing checks all month. I have lost a bill here and there and of course the late fee is there. No problem, but what if it was a money problem ?

I am no dummy and it seems that the use of money is worth money, to put it another way when you borrow you are actually renting money. Therefore there must be some type of incentive for people to pay the rent on time. And most banks are actually subletting if you take it from this point of view.

As I remember the words of Benjamin Franklin on this subject (moneylending) I am also reminded that it is 2010 and way too late to go back. He was right, but the rest of the world was wrong. It's all in what condiment we would like on our bite of the shit sandwich.

Capial One called me about a month ago. That card has a low limit, but the question posed to me, after IDing me as well as they could and the call was recorded, was if I would rather have the charge declined if over limit or to pay it, which incurs a $29 charge. Bandying this about a bit, the situation is now thus. The card has no limit whatsoever. But unless I pay up the next month it will be that charge every month until brought in under the limit. In a way it is like the old American Express card.

In a way it could be said that you never have money, you are simply using it. We could live very happily under a system totally based on credit, and we actually have since workers got paid in anything other than salt (salarum). Once you see that, you can see that yes, the situation is really bad. But with a clear head you can also see that a credit based economy is not what brought about our downfall. If we still had a productive society we would have a strong viable economy and people like Hunk, Real and a few others would be full of shit. But the system has been run into the ground so these people, the doomsayers and such as one might call them, now they are right. Don't argue with people who are actually right.

In short, it wasn't purely the use of fiat currency that brought down the fiat currency. As such it is not the use of credit that destroys credit.

T

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