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I was sent two articles recently and both were about how some credit card companies are raising their interest rates for no apparent reason. There was some talk about it before, but it appears to be even more widespread.
The biggest culprit? Bank of America.
Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a “periodic review” that assesses customers’ credit risk.
[Via AOL.com]
Businesses do have a right to make money. But does this sound fair?
The bank [Bank of America] said it planned to raise the interest rate on her credit card from about 13 percent to 24.99 percent. Fishkin, 60, couldn’t figure out what she’d done to incur the higher rate. She had never been late on a credit card payment, just refinanced her home at a lower interest rate and just been rewarded by her credit union with a lower rate on her credit card there, she said.
[Via Star-Telegram.com]
Fishkin tried to get an answer on why her rates were increased but couldn’t find an answer. With $12,000 on her card (due to recently relocating), the additional 11.99% in interest is going to hit hard.
I don’t think I have to elaborate on how upset I would be if my credit card decided to raise my interest rate. I’ve been trying to keep credit lines open to help our credit score right now, but if they raised my interest rate more than a few percentage points, that would be the last straw. I’d complete the paperwork to close the card and pay it off under the current agreement. That generally appears to be an option if this happens to you.
In letters that were seen by or described to The Charlotte Observer, Bank of America told customers that they could lock in their current rates if they requested it in writing and agreed to not use the card and paid down the balance. If they wanted to keep using the card, they’d have to agree to the higher rates.
[Via Star-Telegram.com]
I guess I just don’t get it. If a person has been paying their credit card as agreed at 13% - why raise it to 24.99%? Wouldn’t that make it more difficult for the person to pay the debt and they would be more likely to default? That is a huge change in the interest rate.
Or…are they hoping that those who have been responsible with paying their cards will still pay responsibly with the higher rates?
I’d love to hear your thoughts.
Thanks to Anne and Tracy for sending me links to the articles!
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Posted: February 20th, 2008 at 3:02 am
This happened to me as well - they are raising my rate from 13.49% to 19.99% if I don’t opt-out at the end of the month. To date I have never had a late payment or gone over my credit limit on any of my credit cards and my credit score is in the 700s.
GM Card (owned by HSBC) did this as well - they nearly DOUBLED my APR from 16.99% to 31.49%. The only explanation they could offer was that they conducted a “periodic review” of my account and found that I had a high balance (due to a recent cross-country move) and was paying only a little more than the minimum. So, by following my card agreement and being a good customer, my account went into default. Unfortunately, I’m unable to opt-out of these changes. Hopefully I can pay off/transfer that balance before I get killed by that finance charge.
I understand that the economy is terrible right now and that banks need to make money but there’s a difference between trying to make a profit and robbing your customers.
Posted: February 20th, 2008 at 8:24 am
We’ve studied this in detail lately. The best guess? Bank of America’s takeover of Countrywide Lending was to absorb that company and let it go silently bankrupt on BOA’s books. Wouldn’t it make sense (if you were a bank) to secretly raise rates on people to try and make as much cash back to cover their losses? I’m not at all condoning this, but unfortunately too many people don’t pay attention to their statements and simply pay their bills without question. For a reason, my money would go on their assumption that enough people won’t notice and they’ll end up making quite a bit of money without furthering their outstanding receivables.
Posted: February 20th, 2008 at 8:26 am
P.S. Thanks for bringing attention to this and trying to get the word out. It makes me so mad to hear about what crooks these companies are…
Posted: February 20th, 2008 at 10:42 am
This is one of the reasons I closed out my account with BOA almost 8 years ago and have never considered going back. They are one of the few banks that have consistently popped up over the years with negagive banking practices. The other banks/cc companies are probably not much better but have been willing to be reasonable in some instances.
Posted: February 20th, 2008 at 10:45 am
Capital One is doing this too, my rate recently went up and the only stated reason was my existing “low” rate. That finally pushed me into an aggressive plan to pay off balances and get rid of some onerous debt-load. The bottom line is credit card companies are completely capricious, greedy beyond belief and willing to exploit their customers any way they can. Sadly, our laws regulating business only make it easy for them to do this. It’s not a pretty situation–consumer beware!
Posted: February 20th, 2008 at 11:20 am
Wells Fargo did this to me last year — jacked my APR up from 12.99% to 19.99% based on absolutly nothing — my FICO is also high and I carry no revolving debt, including on that card — what I do put on it, I pay off as soon as it posts. They don’t need a reason. (If I did carry a balance, I would have complained a lot louder; as it is, I’m just slightly disgusted.)
Posted: February 20th, 2008 at 1:47 pm
That’s a pretty big jump - that would most definitely annoy me. I’m sure there are other institutions out there that would be happy to take my business and carry my debt.
I’m still in shock reading that jump - that’s almost doubling the rate. Can you imagine if one day for no reason the cost of gas just doubled at one chain only? They’d be out of business in no time - but because in general people aren’t financially savvy the banks can get away with it.
Posted: February 20th, 2008 at 2:05 pm
As soon as I read this post, I called BOA to check my interest rate. BOA bought MBNA, the originator of my credit card back in 1998, about a year ago. My interest rate remains 13.9 percent, I had to do some serious brow beating to get them to lower it to this point about 7 months ago.
I thought credit cards set their rates not only on customer’s rating but also the federal interest rate, which fed chief Bernake has been cutting for months now. So, it’s cheaper for BOA to get money for the bank, but they are making money more expensive for consumers.
That’s not playing nice, but then again, they’re a credit card company, they don’t know how to play nice.
Posted: February 20th, 2008 at 2:13 pm
Interest rates are set by the Fed. but one way that credit card companies calculate interest is through the prime rate (set by the Fed) PLUS some other rate. BOA (and in my case, HSBC, for others, Capital One) is raising the other rate that they charge. So, for example, instead of my rate being prime plus 7.9% it’s now going to be prime plus 15% (or something, I don’t have the numbers in front of me now).
You’re right - they DON’T know how to play nice. They are evil.
Posted: February 20th, 2008 at 3:28 pm
>With $12,000 on her card (due to recently relocating), the additional 11.99% in interest is going to hit hard.
Wow, the understatement of the day. How about “the 12,000 on her card now amounts to indentured servitude to BofA”?
This is just the banks looking for a profit center to make up for their stupidity in the mortgage market. They’ll milk everyone they legally can, and unfortunately with all the rules thrown out by the last 30 years of congress they bought with campaign donations, there’s not much they legally can’t do.
But a 12% increase. Yoysa! That kind of hit on their brand when people start complaining to their friends can only mean to me they expect the dem administration in jan 2009 to re-inact some real consumer protection rules and they better gouge while they can.
Posted: February 20th, 2008 at 3:36 pm
Jen on note one. Call you congressman, your senator, both… really, I’m serious. That’s ridiculous. I saw a congressional hearing about a year ago randomly changing channels and they were really putting the cc companies on the hot seat about extra fees and other techniques they use to ensure people pay WAY more than they ever borrowed and then still have the same balance on the card. They don’t have enough majority to make new rules but they may very soon.
Really, please do it. Ask them if they’d like you to write it up in a nice letter, with dates and photocopies. (I did a senate peon gig for 6 months, so this isn’t just a random suggestion). They carefully file cases of their constituents like that so they can hit those guys in a hearing. And there will be banking hearings…oh will there ever be… lots of them.
Posted: February 20th, 2008 at 5:00 pm
Some people caught by this I feel sorry for.. others not quite so much…
I do feel that banks should be allowed to raise rates, but only based on hard facts:
* Interest rates should be set by contract on the card agreement to prime + x, where x can be determined by credit score, total outstanding credit, payment habits, etc. That amount x should be easy to understand and follow for consumers. Should the bank want to rescale this percentage (x) independent of credit score, outstanding credit, etc, they should be forced to notify consumers and give an opt out, where that x remains fixed based on the old table but further purchases are not allowed on the card.
You see, some people will have good credit and qualify for good rates but take out half a dozen cards, rack up a ton of debt, and then become a risk. Their first card at 12% may suddenly be undercharging for their debt/income ratio. The bank entered into the contract with someone with a 780 fico score and now they’re 700, even though they’re current on all loans. You’ve changed your creditworthiness, and the bank should be allowed to adjust.
But if *nothing* has changed with your fico, your debt/income ratio, etc, then all prior purchases should be charged the same prime + x as before….
It’s easy to see that banks are screwing customers, but customers are often screwing banks as well. You may think you’re still a good customer, but from what limited data the banks get, you may suddenly look riskier.
An alternative would be simply to set maximum interest rates by law (at prime + y). However, under such circumstances, be prepared for credit card companys to get much more strict about how much credit they’ll extend to people….
Posted: February 20th, 2008 at 6:10 pm
From reading this post and comments it may be more prudent to make the change now and just pay off your credit card debt and call it a day. It sounds like a losing proposition to have credit cards at this time.
Posted: February 20th, 2008 at 6:31 pm
Last week I found that I missed my BoA due date by five days. This is the first late payment in over 18 months. The result? My rate went up from 9.9% to 31.49% I was told that if I paid on time for the next 6 months they would lower it back to 9.9% Because of the large balance I have this account the increase will result in an effective $1,500 “penalty” for being a couple days late. I refuse to accept this and will be making some changes.
Posted: February 21st, 2008 at 1:12 am
I recently wrote about examining your credit card rates often because of the fact that I got hammered with a ton of rate increases unexpectedly after having no late payments across the board.
Turns out that I’d recently talk to the bank about refinancing with a doing a credit check…then a bunch of my cards raised my available balances, then one raised my rates a ton, then the rest started following suit. (except the one with my military credit union account)
It’s amazing how just a sneeze in the wrong direction can completely set you back for the year. Kick us while we’re down!
Posted: February 21st, 2008 at 5:10 pm
[…] Mr. Debtbeater: I recently wrote about examining your credit card rates often… […]
Posted: February 21st, 2008 at 7:37 pm
It’s interesting, I’ve noticed my cards going up steadily over the last 12 months here in Australia, but no big jumps like that though.
Posted: February 22nd, 2008 at 2:14 pm
I currently work for a financial institution that issues credit cards. We are one of the few that don’t participate in the “universal default” practice when dealing with our members accounts but did recently go through a “change in terms” as described in this post. When our members qualified for an account they are given an APR based on thier current credit / income qualifications. Over time their accounts are reviewed and as they qualified for better rates their accounts were adjusted in the members favor, however we were VERY liberal and only raised a members rate if they were late for more than 60 days. The increase was only for 3 months and would revert back to the lower rate after they were current.
NOW, with the increase in the amount of defaults in the credit industry our bank has decided to make some adjustments. For members who paid on time…nothing changes, they keep the lower rate whether they currently qualify or not. BUT…if they have been late in the last 12 months the member is given a rate based on their CURRENT qualifications or offered the opportunity to “OPT-OUT” and pay it off at the current rate, thus closing the account.
Basically ….pay as agreed and things are fine. I agree that there is too much “arbitrary” changes being made in the industry. Consumers need to protect themselves by calling thier issuer and finding out what circumstances can trigger a rate increase. ***Remember that it’s OUR reponsibility as consumers to handle our accounts like adults and THEN we can go after the card industry when they act like spoiled, greedy, insolent, CHILDREN.
KNOW WHAT to EXPECT and make decisions based on this knowledge. There are some SNAKES out there!!!
Posted: February 22nd, 2008 at 6:12 pm
This happened to me with MBNA/Bank of America. I wrote about it in a post on my blog titled “What Sparked My War on Debt.” Click my name to read that particular post.
Posted: February 22nd, 2008 at 8:00 pm
Glad to see alot of my fellow Bank of America fans in this blog. Being a customer of BOA’s for a few years now has opened my eyes so much I’m considering switching banks which is really the only way I can hurt them. Interesting with the purchase of Countrywide this all goes down!
Posted: February 22nd, 2008 at 9:14 pm
Reg-C,
There are responsible practices that keep a bank honest to its shareholders and then there is usury. Five days late for one payment does not equal triple the risk. Raising rates on someone by 12% increases the risk of a total default, which if that’s a reasonable outcome for the bank to strive for, only indicates that the bankruptcy law changes were an even bigger mistake than they seemed at the outset. Funny how we didn’t see this kind of thing happening, at this level, previous to the change in the laws. The banks spent a few hundred thousand bribing, oops, I mean making campaign contributions to, the politicians and this is where we are now.
Banks continue to prove how very sloppy they are with strict regulations removed.
Posted: February 24th, 2008 at 11:09 am
[…] Blogging Away Debt tells us of More Reports of Credit Card Interest Rates Raising Mysteriously. […]
Posted: March 6th, 2008 at 3:47 pm
[…] robweinbergnHI was dispatched member articles firm and both were most how some assign bill companies are upbringing their goodness rates for no manifest reason. There was some style most it before, but it appears to be add more widespread. … […]
Posted: March 18th, 2008 at 11:18 am
[…] More Reports of Credit Card Interest Rates Raising Mysteriously I was sent two articles recently and both were about how some credit card companies are raising their interest rates for no apparent reason. There was some talk about it before, but it appears to be even more widespread. … […]
Posted: March 18th, 2008 at 1:03 pm
According to many experts on the card industry, the credit card issuers are misleading consumers and making up their own rules as they go. They advertise with cute commercials, offer a very low introductory rate, and hire the finest minds to figure out a way to trap you in the fine print. The real problem lies in the fact that the industry is basically unregulated with no over site committees around. Lets go a little deeper and expose some things.
http://www.creditsnote.com
Posted: March 19th, 2008 at 8:17 pm
I would like to confirm that WaMu raised our rate from 11% to 21.9% after a period credit review. We have always paid our account on time. And we were shocked! They said it was due to a “periodic credit review”. Since a lot of this seems to be going around - any suggestions?
Posted: March 24th, 2008 at 11:25 am
I think its totally unfair and just greedy that they raise interest rates if you are paying your ccards on time. Actually, it’s really none of their business how you pay other things, as long as you are current with them. I find it highly offensive that a creditor can look at my financial life to base their decision, actually it should be illegal for them to go in randomly for any reason. With all this country is going thru, this is only going to make it worse. I have just closed 3 credit cards, because they all raised my interest rates trememdously, I have always made my payments on time, I have two left, and I’m sure in time they will also raise my interest rates.
Posted: March 24th, 2008 at 11:26 am
Oh yeah……Wells Fargo Financial and JP MOrgan Chase.
Posted: March 26th, 2008 at 4:59 pm
WaMu just did the same thing to me. They hiked my rate from 9.99% to 19.99% based on their “periodic credit review”. I have never been late on any payments with any creditors and have always paid much more than minimums on all of my accounts. My credit score has gone up 20 points this year. I took the option to close the account to retain the lower rate. There really wasn’t any other choice! I had arranged automatic payments from my checking account, and got out of the habit of reviewing the paper bill. I was lucky that I decided to review this one. A word of advice, inspect EVERY bill closely.
Posted: March 28th, 2008 at 10:14 pm
Around 03/01/08, Wells Fargo Financial Bank increased my credit limit by $2250 without my even requesting it. I’m sure that this is because I ALWAYS pay my bills on time and have brought my balance down in the past few months. Less than 3 weeks later they send me a letter stating that my APR will be going up by about 2 points. They claim this was due to my Trans Union credit report and my history with them. Luckily, 2 hours earlier I was approved for a 0% balance transfer Visa Card from my bank.I went to my local office and was told that I needed to call customer service,and they told me that the letters were sent out ‘across the board’.
I called customer service and told them that I could pay off the balance if the rate was not reduced to a reasonable rate, and was told that due to my ‘credit obligations’ they could not lower my rates. I assured them that my obligations had decreased since they raised my limit 3 weeks ago, and was I told that I needed to check my Trans Union report.
I checked it several hours later, and there were no new or incorrect debts, so I called W.F. back and spoke to a different customer service rep
who finally admit that it was a business decision to raise rates and there was nothing that she or even a manager could do.
Anyway, I guess you’ve figured out that I’ll just transfer the balance (maybe leave a few dollars on it) and write this greedy company back explaining why.
Anybody with a similar situation?
Jeff
Posted: March 28th, 2008 at 11:15 pm
NEWS : i received a letter too and my rate was to be increased from 14% to 21%. My credit score is 755 and i m not even close to reaching half of my credit limit to any of my cards. btw i only use 2 and hav abt 2k of debt. This is really about banks try to keep their profits up. This in return will screw and force more bankruptcys. I m just puzzeled as to our great democratic govt. isnt doing anything about it… jus cant believe this.
Posted: April 1st, 2008 at 9:13 pm
I received my letter from Wells Fargo Financial yesterday that they are increasing my interest rate by 3%. I have never heard of “risk-based pricing” unitl I received their notice informing me that I am now considered a risk. They used the same credit report to approve my credit card as they did to determine that I was a risk. They didn’t deem me a risk when they used that same credit report to approve my application for their credit card, nor was I deemed a risk when they increased my credit line. I’m a risk now because I have too much credit according to the customer service rep I talked to at Wells Fargo. I recently looked into refinancing my home which apparantly was held against me, my credit couldn’t be too bad since I was approved for a loan at 5.35% interest could it?
I suggested to the customer service rep that maybe they were raising interest rates because their rates are based on the prime interest rate and since it was so low Wells Fargo was losing so much money that they had to make it up somewhere. After all, I’ve never been late with a payment and I always pay more than the minimum payment. She assured me that this was not the case, that they recently reviewed all their customers credit reports, some customers interest rates actually went down as a result of their credit report. I did go on to express my feelings on their practices which I think is very unfair, which got me no where.
I have done a lot of research since yesterday and it seems to me that this is just a legal form of loan-sharking and rape, the credit card companies can charge you any interest rate they want to, and the American people just have to accept it.
The Senate and Congress is aware of what is going on, hearings were held last year but nothing ever came from them to help the consumer. There is a bill in the House that is supposed to address credit card companies again (I’m not sure how it reads) but I urge everyone to contact your Senator, Congressman, call the FTC and the Federal Office of the Controller and file a complaint-thats what I did today, let your voice be heard. A lot of people do not know that this is going on, even the aide to my Congressman didn’t know about it, I got to educate him on it.
I did transfer my Wells Fargo balance to a credit card with a low transfer APR until the transfer balance is paid off and I intend to pay it off soon and this company does not participate in risk-based pricing, they use only your payment history with them to determine if your APR increases.
If every customer of Wells Fargo, Bank of America, and all the other blood sucking credit card companies out there would start complaing to the right people and stop doing business with them, maybe these companies would stop their sorry business practices.
Posted: April 7th, 2008 at 3:49 pm
Right on, Cathy. If regulation is non-existent then the power of the purse is the only thing left (well, aside from civil disobedience, but we are all too busy making ends meet to get around to that, it seems). Take your business elsewhere, a credit union for example (which the banks have worked very hard over the years to get shut down, which recommends them highly, in my view.) There are also some new players out there eager to please because they are relative newcomers, like ING and other online-only banks and State Farm and other insurance companies (I don’t work for any of these, just using them to out that the field is broader than it used to be, the one upside of deregulation).
Posted: April 11th, 2008 at 7:21 am
My Bank of America credit card rate has decreased 1% since December 2007. Can’t remember the last time I used it. Actually, did not activate the new card they sent last year. Have been paying more than minimum. The past two months, the minimum due was $15, although the current due was over $200. They really want me to stop paying so much. I am surprised they lowered the APR.
Posted: April 11th, 2008 at 10:45 am
Hello all. I would like to share with you my story. I have right now three credit card accounts. Two with Capital One and one with HSBC credit card. I have had them for seven years. I have never been late or late in paying my bills in all my years of being with them. I paid my bill on time and sometime paid more then what I was asked to pay. I also am someone who has received these same letters from both them telling me that they were going to change my interest rate from 12 to 24.99. When calling both these credit card companies they gave me no reason to the reason why they were raising my interest rate. I asked them why they are doing this to me and raising my interest rate when I was never late or behind on my bills to them ever since I have had them and been with them in these seven years I had these three cards. The only thing they told me is that it was that the head people of these banks that have chosen to raise interest rate on everyone that has account with them. I told them this was unfair and feel that they are just being greedy, selfish and robbing us all of our hard money we all make. After getting off the phone with them and when I was on the phone with both these companies. I told them that I do not want these cards any longer or agree with these changes or agree with them and will not and refuses to pay a higher interest rate after I been with them for many years and never was late or behind. What you all have to do and must do is. Write them all a simple letter that state you disagree with this change and refuses to pay this high interest rate that they all want to charge you on your accounts. You also must tell them that you want your account closed with them. What people are now getting told is wrong by these lenders. It is said if you close an account then it will lower your score with the credit reporting companies. This statement is false. All these Credit card lenders do this lie to try to use this lie to scare you and keep you in trapped in their company or to try to keeping you as their costumer to them. The other lie they will tell you is and what they will tell you if you close your account with them and make your payments to them that they will charge you a service fee of three or more dollars to process your payments you make to them on time. This is also a lie and if they tell you this after you been a good costumer to them or any of you our told this. You must file a federal complaint with the costumer protective league in D.C and report all these statements that they tell you to scare you into keeping their cards. They are clearly violating and going against the law and the fair credit reporting act. The only way to stop these companies from doing these things to us is to report them and get the word out like we all are doing. I hope this help you all with this issue. May God bless you all.