Chase Raised Rates on Low Interest Cards

I read an interesting article on MSNBC about Chase credit cards. There are quite a few people who did a balance transfer to take advantage of an offer with a low interest rate for the life of the balance. I love those kinds of deals and balance transfers have played a huge part in our debt reduction.

I read through the fine print carefully with each offer that we did. Every balance transfer we did was specific in saying that as long as you were in good standing you would lock in that low interest rate. It appears that Chase had similar wording with one of their deals, but decided to change the terms:

Last November, Chase notified about 400,000 people with these low interest cards their minimum monthly payment would more than double and a $10 monthly service fee would be added.

[Via MSNBC.com]

I would be so upset if one of our cards did that to us. I would definitely feel like it was a bait and switch. According to the article, there is a class action lawsuit pending. I think this lawsuit is one to watch as far as special offers from credit cards. It will set a big precedent.

Posted by Tricia on April 17, 2009 at 6:59 AM in Credit Cards | 11 Comments »
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Emmi responded:
Posted: April 17th, 2009 at 7:49 am
The top credit card issuing banks were hauled into the white house yesterday for a good talking to. Hopefully congress, as mentioned in this article in the wapo will accelerate the rule changes that include strict rules against changing the interest rate on existing balances.

These guys are due for some serious regulation. Long lacking.
Kev responded:
Posted: April 17th, 2009 at 9:30 am
I hate them… I hate Chase. I honestly believe they are the worst of the bunch.

My fiancee and I are getting ready to refinance one of our homes and have been shopping around. Chase is offering a huge discount on closing costs b/c of the State Workers Union my fiancee belongs to, so they seem to be the best candidate so far and it’s driving me insane. I have shopped everywhere trying to find someone that will beat their deal b/c I despise them so much. I would almost rather pay more in closing fees just to avoid them.
susan responded:
Posted: April 17th, 2009 at 11:35 am
Chase is doing the exact same thing to me. I have reduced my debt from $73,000 to 23,000 (and should have most or all paid off by the end of the year) in part by using 0% offers and, once, borrowing against a credit card to pay off higher-interest debt. That was a Chase card and the rate was supposed to be 3.99% for the life of the loan. It was 3.99 for quite a while, but now it is creeping up and is currently at 6.34%. I can’t wait to get rid of them.
Jim ~ mydebtblog.com responded:
Posted: April 17th, 2009 at 12:57 pm
I’ve never applied for one of these life of the balance cards before, only the 0% no fee balance transfer ones. Usually the 0% ones limit you to a set amount of time, 12-15 months, to get it paid off. Obviously if you don’t make it by the final statement of the offer, they back roll the accrued interest into the balance. This has forced me to pay off debt at a few grand per year, but I’m wondering about these life of the balance cards. Why leave a card at 12% if I could get a 3.99% and pay it down faster? Something to consider but I don’t like how banks can change your terms at any given moment.
Debt-free Dan responded:
Posted: April 17th, 2009 at 1:04 pm
Aren’t they just doing something each cardholder agreed to when they signed up (whether they read what they were agreeing to or not)?

I mean, their profit is declining. How do they raise profits? By raising rates and fees. That’s where their company’s income comes from is from what they charge to loan you money.

This is essentially an adversarial business model not a cooperative business model. Effectively, you agreed to borrow their money at a variable rate. While the rate can vary based on your actions (or inactions), it can also vary on a market condition for on the company’s whim.

The only winning move is not to play. Pay them off and cut them up and then you don’t have to play by their rules. The borrower is slave to the lender.
Caitlin responded:
Posted: April 17th, 2009 at 2:02 pm
I agree with Debt-Free Dan’s quote from Wargames: “The only winning move is not to play.”

How can a class-action lawsuit even get off the ground on this? I thought it was in every credit card contract (and bank contracts too) that you agree that they can pretty much change the terms whenever they want.

I would be seriously pissed if it happened to me, but it would be no more than I agreed to when I signed up for the card.
Tricia responded:
Posted: April 17th, 2009 at 5:04 pm
Dan and Caitlin – I agree that not playing with credit cards is the best move unless you can handle your spending and pay your balance in full every month.

I look at the situation like this. There is that fine print that lets them do basically whatever they want with the terms. You agreed to that. Then they give you an offer that states that this new deal is for the life of the balance. They are saying and advertising one thing – but really it’s something else.

I wish I had a copy of their offer handy. I’d love to read it.
Kev responded:
Posted: April 17th, 2009 at 5:38 pm
“How can a class-action lawsuit even get off the ground on this? I thought it was in every credit card contract (and bank contracts too) that you agree that they can pretty much change the terms whenever they want.”

Most of us know that the “devil is in the details” when it comes to credit card agreements, but I could totally see a court ruling against Chase if they find that the original balance transfer offer and it’s corresponding marketing material was unclear or deceitful in nature.

I’ve never heard of a credit card issuer reneging on a balance transfer offer before. Never. I understand that the deal is off if you break the agreement by paying late or exceeding your limit, but I thought those offers were otherwise safe until they expired. Your purchase rate and cash advance rate can change at anytime, but I have never seen the same said of a balance transfer offer. Chase is playing dirty and now they are getting called out on it. Despite popular belief, the card holder agreement doesn’t allow issuers to pull a straight-up bait and switch. I hope they get their ass sued off.

I hate Chase. The End.
Jjana responded:
Posted: April 17th, 2009 at 6:27 pm
bank of america just sent out notices too! they are upping their fees 1 % on everything if you use their cards. However, anything already done is not affected if you are in good standing.
Mary responded:
Posted: April 17th, 2009 at 8:13 pm
I read about this and supposedly they already credited people back for the $10 fees they imposed, once they heard about the class-action that was started.

I hate CHASE too…
Mike M responded:
Posted: April 20th, 2009 at 4:51 pm
One side note:

I’ve seen this story on Chase multiple times. Not once did I see any evidence that they did or did not allow for the normal opt-out.

If these people received notice of change of terms and they did not choose to exercise their opt-out option, then I see nothing wrong with what Chase did , so long as they made it clear opt out was an option.

If the consumer opted out of the changes, they would never have had any of the additional fees or higher rates, or even increased payments. They would simply have been able to pay off the balance on the original terms, but they would not be allowed to make new charges. NOTHING of that would have gone against their original agreement.

Honestly, the companies have the right to change the terms – that has ALWAYS been the case. And you always have the right to decline the new terms. After that point, though, the company has no obligation to provide you with additional loans.

The things that need to be changed? The consumer needs to be educated on this option BEFORE they get credit cards. They need to be given a reasonable time frame to respond to the changes in the agreement. And choosing the opt out and closing the card should NOT be counted against their FICO score.