Tuesday, March 24, 2009

Your credit card company seems to hate you (continued)

Credit card companies, including Bank of America, were thrashed once again on Capitol Hill today, this time before a hearing of a subcommittee of the Senate Judiciary Committee.

Senators at the hearing, including Vermont's Bernie Sanders, floated the idea of an interest rate cap on credit cards, a notion that's gaining support across the country.

"I think people have had it up to here with financial firms," Sanders said at the hearing.

A Rhode Island salesman, Douglas J. Corey, was the star witness at Tuesday's hearing, reports the Dow Jones News Service. After he mistakenly failed to completely pay his minimum monthly credit card payment - he misread the statement, Corey said - Bank of America more than doubled the interest rate on his card to 28.99 percent.

"Bank of America has come before you asking for help, understanding, and, with both hands open, for financial support," Corey said. "Yet when we the consumers go to these institutions looking for the same help, understanding and financial support, we get roughed up and receive no compassion."

The Squeeze reported last month on the trend of credit card companies raising rates, fees and charges - and even offering some customers $300 to grab the scissors and halve their cards.

Sanders and Illinois Sen. Dick Durbin introduced a bill this month to cap the interest rates on credit cards at 15 percent. That's the same interest rate cap Congress placed on credit union loans almost 30 years ago under the Federal Credit Union Act.

Like the law regulating credit unions, the bill would give the Federal Reserve Board authority to adjust the rate cap if it determines that the safety and soundness of lenders are in jeopardy.

Several states have interest rate caps on credit cards, but issuers can get around those laws by relocating to states, such as Delaware, that have looser usury laws.

Credit card companies oppose such caps, saying they restrict profitability and could actually tighten credit as companies restrict card access to only the most reliable customers.

Congressional discussion of interest rate caps doesn't often progress much past the talking stage. In 1991, New York Republican Alphonse D'Amato authored a bill to cap credit card rates at 14 percent. It passed the Senate 74 to 19, but died in the House.

Will this effort be pushed to passage by the swell of discontent with banks, or is it merely the Congressional outrage of the moment? (See Bonuses, AIG).

Tell us what you think of the interest rate cap concept.

37 comments:

anne said...

Careful what you wish for...this is one of most dangerous ideas. If you cap interest rates, banks are only going to lend to people with perfect credit scores. My credit card rate is also in the high 20s, but I pay my balance every month and earn cash back. What do you think pays for all of those credit card rewards?

The sense of entitlement in this country is frightening. If you ask Bank of America to loan you money, they can charge whatever they want! Stop buying things you can't afford and stop complaining.

Anonymous said...

I'm with you Anne. If you don't overspend and have a balance on your credit card, then tough for you. I can honestly say I have no idea what rate is on my credit card as I make sure to never have a balance.

Anonymous said...

Solution to credit cards... CUT THEM UP!!!

Anonymous said...

I think it's a good idea. To many people used to be able to afford their credit card bills but with everyone loosing their jobs it makes it alot hard to pay your bills. And not every one is making enough money on unemployment to pay off their balance every month.Yes they should put a cap on interest rates, maybe not as low as 15% but there should be limit. Some people just can't get the credit cards paid off with high intrest rates.

Anonymous said...

Anne this is for you. If you pay your card off every month why don't you pay cash and get away from the high interest? Seems to me that you to are buying what you can't afford.

Anonymous said...

I agree with you both, HOWEVER, credit card issues have abused their customers, particularly with the universal default concept. If someone maintained a flawless relationship with company X, but missed one payment with company Y, company X could use that information to raise the rates of the customer. That's simply BS. Fortunately that's going away, but there's many examples of credit card issuers abusing their customers. *this is not a support for interest rate caps*

Anonymous said...

I'll stick with borrowing money from my loan shark... the rates are cheaper!

David Easley said...

Bank of America and Wachovia..oops I mean Wells Fargo..can go to you know where for all I care. I am so very happy that America has finally woke up from the coma of overspending and greed. Financial companies have been sucking the blood from the average joe for far too long. Let the pain keep on coming for them. That is the only golden side to the current recession. I hate to see people lose their jobs but I LOVE seeing the big Wall Street firms roll over and die.

Daiko said...

@ Anon at 4:16PM

If you pay off your card every month in full (also known as paying off the balance) and you have a good credit card, you are earning points to use. If you have a great credit card, you are earning cash back instead. Seems to me you should read the entire comment before opening your mouth.

@anne
Not only is the sense of entitlement frightening, the sheer amount of the willfully ignorant troubles me as well.

Anonymous said...

I understand the logic of it's our money, we have a right to determine how we give it to you, but when the credit card companies punish even their most reliable customers (I have a high credit rating and haven't missed any payments in so long I can't remember - and the 2 I did were waived, then something needs to be done, or even the best scores won't be able to afford credit. Wachovia, Chase and Capital One have all raised my interest rates - it's absurd - and all did it strictly for profit, not because I did anything wrong.

anne said...

4:16- you didnt read my comment clearly...i don't have high interest rates because i don't carry a balance. I use the card for rewards...I get cash back on all of my purchases. So I am making money by using the card.

Anonymous said...

I hear that credit card companies even change the day their bill is due. That's dirty.

As far as this goes, it feels like it is getting to the point in which you could find a better interest rate taking a loan from the mob than from a credit card company.

Anonymous said...

Anne pays it off every month because there is a 30 day window that if you put something on your credit card, and pay if off within 30 days, you have no interest charges, therefore she earn rewards while not having to pay any interest.

Anonymous said...

You want to know who pays for the credit card rewards? Its the merchants. The merchants pay between 1-3% of the value of purchase on average every time you use a card to pay for a transaction. The proceeds from that 1-3% is split among the merchant's bank, the network (Visa, MC, etc.) and the cardholder's bank. The cardholder's bank then uses those proceeds to fund rewards. Zero of those rewards come from fees paid by the cardholder themselves, including interest income.

Learn the facts.

Anonymous said...

I've looked at some of the rates on my cards and am doing just what many people suggest...paying them off and getting rid of them. Now I have them begging me to stay and proposing low rates. Go figure.

Vincent said...

Use of credit cards is a choice, a privilege if you will, not an obligation or requirement for being a citizen .

People never seem to get the fact that you only pay credit card interest when:

You use them.

You don't pay your balance off in full by x number of days.

I don't think Tony Soprano is leaning over your shoulder, strongly suggesting you over extend yourself for some nefarious reason.

If the feds want to help, let them bake cake.

Anonymous said...

I make over $250,000 each year. I have one credit card. I have paid it off in full every month except one since 1981.

You whiners are blessed to have clean hands to even handle a credit card. You could very well be digging in the dirt 12 hours a day and not even know what plastic is.

I pay excessive taxes for you.

Anonymous said...

Holding the rates low will not only make lenders to only lend to individuals with good credit but will also allow people with credit to continue to live beyond their means. I say make credit card rates punitive. Make them so high that if forces you to pay the balance off each month or suffer. The one caveat to that is, lenders should be required to be more transparent in how your rate may change.

Anonymous said...

I had to use my credit card due to my husband having to have emergency surgery and I only worked parttime to sustain our family of 4. It was a 2 yr hiatus with part time income for our family. Obviously we had to eat and my paycheck went to pay my mortgage. I never meant to overspend and have always been frugal. I am having a dickens of a time trying to pay them down now. I welcome the cap!!

Anonymous said...

I don't know if I agree with Congress on interest rate caps, but something does need to be done when credit card companies can just arbitarly change your rate at a whim. I think it is absurd that someone misses one payment or is late by one day can have interest rates doubled. I myself, had my interest rate doubled this past year simply because I had used too much of my available credit. I had never had a late or missed payment just used more than BOA thought I should. It is crazy. Well, whatever they do these banks need to remember that hard times won't last forever and when things get up and running again and they are wanting to extend credit to people I hope many will remember these things and say NO THANKS. I will take my business elsewhere.

Ed said...

The credit card companies don't hate us. They love us. They squeeze every single dollar out of they can and then they harass you endlessly over the phone if you fall behind. Credit cards and the unethical high interests prices are nothing more than loansharking.

It's often not about overspending. The Capitol One practice of $300 credit cards that they then offer you another of to help pay your first one is nothing more than predatory lending. This system needs to be reined in.

Anonymous said...

Dear Anonymous,
If you make $250,000 a year you don't need a credit card. Ever heard of a debit card? Duh! And the taxes you pay is probably not enough,so don't cry!

Anonymous said...

I don't want them. I had some and paid them off when rates went up to levels of thievery. If I don't have the money for what I want then I save or do without.

Anonymous said...

Ditch the 'entitlement mentality'...agreed...but can't you apply that reasoning to the concept of capping the interest rates and making people earn good credit ratings?

At least if, God forbid, we have to 'carry a balance' or miss a payment by a day, we wouldn't be so severely penalized. There's gotta a be a happy medium, people!

Anonymous said...

This is little ore than congress pandering to the foolish. In the first place, if you buy what you cannot pay for, you have volunteered to make a deal with the devil, and the devil will get his due. The solution is relatively simple: live within your means.

And if you are foolish enough to buy that which you cannot pay for, take just a little responsibility for yourself and SHOP FOR TEH BEST RATE!!! this city is covered up with credit unions that offer far better deal than then banks, but you'll have to actually check to find that out.

But if you do want to buy what you can't pay for and you find a bank that will lend you the money (and that's all a credit card is) STFU and don't whine when they charge you for taking a risk on you. That you do it in the first place ought to make clear that you ARE a risk. Take away their opportunity to mkae a premium rate when they take an excessive risk, and you'll find yourself FORCED to live within your means. you iwll then, no doubt, whine about not being able to buy crap you don't need.

Anonymous said...

I remember when credit card interest rates were linked to the prime rate, and you used to be able to deduct interest paid on your credit cards off of your income tax. Those restrictions were lifted by President Reagan in the early 80's.

Anonymous said...

We just need to realize that the problem with this country is the repubs and we have to make sure the
greed party, the limbaugh party never gains the majority again. They have devastated our economy and we have to back President so we can make it better and work for all our citizens

Anonymous said...

To all you self-righteous posters, believe it or not, frugal, hardworking people with modest incomes need credit(credit cards)from time to time to meet expenses that they can't save enough for. Health insurance copayments, and deductibles, car repairs, dental bills, etc. are examples of expenses working people struggle with.
Have some sympathy Mr. $250,000 per year. I make over twice what you do, and I have some.

Anonymous said...

This isn't about whether or not people are smart with their credit cards, it's about the banks reaching out with their hands for money while their foot is planted on the necks of their customers.

They all got rich gambling and losing our investments, then raise our rates because we're a day or so late on a payment.

Anonymous said...

Anon 7:51: Nonsense! People use unsecured credit because they insist on having that for which they cannot pay. They may be honest, they may be hardworking, and they may be responsible, but NOT if they whine about paying for the service they want.

And it IS a want. Almost no one in this country needs credit for the ongoing expense of their NEEDS. But then of curse no one needs a TV, a microowave, a cable subscription, Starbucks, leather car interiors, power windows and on and on and on. those things are known as "wants", and among responsible perosns come AFTER needs, not before.

BTW, if you make $5ook and expose yourself to credit card interest rates I'd be shocked,but perhaps you do. If so, pay the interest that is being charged by the provider and shut up.

Anonymous said...

Anonymous said...
"I make over $250,000 each year. I have one credit card. I have paid it off in full every month except one since 1981.

You whiners are blessed to have clean hands to even handle a credit card. You could very well be digging in the dirt 12 hours a day and not even know what plastic is.

I pay excessive taxes for you."

March 24, 2009 4:47 PM


Wow. $250K! That's so cool.

Do you feed your ego like this every day?

Anonymous said...

...and the problem with issuing credit cards only to people with sound credit is...? Besides which, I don't buy that load of krap. The financial institutions are so greedy they'll still issue credit cards to as many people as possible. When was the last time you made a 15% return on an investment or business. If they can't "survive" with that kind of profit margin, they deserve to go out of business.

Anonymous said...

"This isn't about whether or not people are smart with their credit cards, it's about the banks reaching out with their hands for money while their foot is planted on the necks of their customers."

This is probably the best image of what they are doing I've read -- ever. Thank you for posting.

Anonymous said...

"I make over $250,000 each year. I have one credit card. I have paid it off in full every month except one since 1981.

You whiners are blessed to have clean hands to even handle a credit card. You could very well be digging in the dirt 12 hours a day and not even know what plastic is.

I pay excessive taxes for you."

March 24, 2009 4:47 PM

Wow. $250K! That's so cool.

Do you feed your ego like this every day?
________________________________

And people like this wonder why 90% of the population wants to see their heads on a plate.

Let THEM eat cake.

Anonymous said...

The interest rate cap is un-American and should be dismissed as a crazy idea. Let the market decide. There are thousands of credit cards to choose from today with varying policies. Pick one that fits your needs and stop complaining - low/high interest, low/high rewards, short/long payoff period.

Anonymous said...

9:23 p.m. No, people don't necessarily use credit cards to finance their "wants". Because so few good jobs that provide good benefits are available for so called working people, credit is needed to cover medical deductibles, copayments, car repairs, etc. No, thankfully, I don't use or own a card, but I understand that consumer credit is a necessary evil. I know plenty of people who don't have any of the "extras" that you mentioned, and, from time to time, they are forced to use credit.

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