I just read THIS NY Times article about what the credit card industry is turning into. Basically, in an effort to assist those who don't pay on time, congress is looking to in some way regulate the amount of interest that can be charged to those people by limiting the penalties that get added to the risky borrowers statements.
In a backlash against this new possibility, credit card companies like American Express, and banks have decided that they will go after those who pay their bills on time. How will they do this? There are a number of ways:
- - Higher annual fees
- - Curtailing cash-back and other rewards programs
- - Charging interest immediately on a purchase instead of allowing a grace period of several weeks
In other words, those who manage their credit well and pay their bills on time will, in a sense, be subsidizing those who do not.
This angers me a lot. Although I have a significant amount of credit card debt, I am currently trying to pay it down. It may take me a few years but my credit is excellent since I pay all of my bills on time. I also usually pay $100 a month over the minimum in an effort to decrease the time it will take me to pay of the massive amount of credit card debt I racked up by being an irresponsible shopper. Why should I also be responsible for those who don't pay on time and who haven't learned from their irresponsible mistakes? This move by the credit card companies scares me and I think that in the legislation being proposed for those who don't pay on time, there should be legislation to protect those of us who do.
What are your thoughts?
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Comments: 26
I pay my bills in full every month (thanks Mom, a great lesson you taught me!) so I'm not affected by this, but when did they sneak this in there?!?!?!?!
They've only curbed some unseemly practices of the Credit Card companies. Thing is...the credit Card companies are an unseemly business, and have made the shifts in their i, as you've discribed, not because it has been mandated by new government rules, but because they can, and will, as they've always done, take unfair advantage of any and all persons who utilize their supposed product/service, in ways that will make them the filthiest dripping rich, as they possably can, because they are a racket, and scammers, though legal they may be, rackateers they are, every last one of them.
I am so glad I am not playing the, "KEEPING A GOOD CREDIT RATING" game, anymore. Finally realized they are all scammers, and oppurtunists, and rackateers. SCREW THEM ALL!
Rob - It doesn't matter to you because it doesn't affect you. However, it does affect most of the people in the US and the actions that the credit card companies may be taking in response to the legislation to assist those who are irresponsible could end up hurting even more people who are responsible with thier bills.
Dorothy - I know the government is not telling companies to penalize those who have paid thier bills on time. I think I've made it pretty clear in my article, and it is clear in the NY Times article that it is the credit card companies and banks who will be doing this. All I am saying is that they shouldn't and that while legislation is being put into place to protect those who don't pay on time, they should also be protecting those who do.
congress wants to regulate the credit card and banking industries but the banks in an effort to stop it are using scare tactics like this.
What really burns me is that these are the very same banks we are bailing out then they are trying to turn around and charge high interest rates and unreasonable fees.
Double dipping at its worst.
I saw on Dateline or one of those shows a couple they had an American Express card since the 1970's never missed a payment, most months paid it off but they were 2 days late with a payment in January and interest rate got jacked to 27%.
I dont think there is anyone who can say they have paid every payment on time.
I am glad you got people aware of this even if it took a scare to get their attention.
I've already done it.
I learned this the hard way. I cancelled two old store charges I never used, and one of my Capital One cards that I never used. My FICO score dropped because suddenly my debt to available credit ratio went up. A couple of months later, Capital One raised the interest rate on my other credit card from 9.99 to 29.99 percent.
So make no mistake. They aren't considering these things because Congress is cracking down on them. These have been in the works for a while.
Further, many cash-back programs are subsidized by advertisers. If they are looking to cut back on cash back programs, I suspect it has more to do with the loss of advertising dollars than bad credit card holders.
We have a BOA credit card that we are paying off and we plan to keep it to help our debt/income ration look better. But we recently got a letter in the mail letting us know that our 7% fixed rate will now be a variable rate that is currently 13%. We want to try to get them to lower it again by threatening to close it, but we are afraid they will call our bluff and Jason's credit rating will plummet. We have never been late on a payment, we always pay the minimum (a plus for them, not us) and we sometimes use it, so they were already benefiting from us. Just because someone pays on time doesn't mean they aren't in financial trouble, it just means they don't want to be in MORE financial trouble.