Thursday, April 16, 2009

Your credit card company seems to hate you (continued)

After taking a thrashing last month on Capitol Hill, banks and credit card companies may be showing some sensitivity to the struggles some of their customers are enduring.

But many, including Bank of America, are still raising interest rates in the face of severe losses from loans.

A consumer credit protection group announced yesterday that 10 banks, including Bank of America, have agreed to make credit card repayment concessions to help delinquent customers avoid bankruptcy.

The National Foundation for Credit Counseling said the banks agreed to modify and expand debt management plans through which creditors provided some repayment concessions, including waiving late fees.

Such plans have been in place for 40 years, the NFCC says. But in this economic downturn and recession, fewer consumers have sufficient income to be eligible for, or the ability to maintain DMPs, often leaving bankruptcy as the only option.

"This represents a significant action on the part of the creditors to take additional steps to help consumers, which is our collective mission," said Susan C. Keating, president and CEO of the NFCC. "This will provide those in debt with more options to stabilize and rebuild their economic lives."

Those creditors are American Express, Bank of America, Capital One, Chase Card Services, Citi, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank and Wells Fargo Card Services.

Certainly, the agreement isn't binding, but banks and credit card companies may be starting to nod to the seeming incongruity of accepting bailout money, then showing little compassion to struggling consumers.

Such behavior has led senators to float the idea of an interest rate cap on credit cards, a notion that's gaining support across the country.

Still, banks continue to raise those rates in an effort to compensate for loan losses. Starting in June, BofA is raising rates for customers who have rates below 10 percent and carry a balance, the Observer's Rick Rothacker reported today.

These customers, who account for less than 10 percent of the bank's portfolio, will now pay rates in the low and mid-teens, spokeswoman Betty Riess said.

Bank of America did retreat this week from an earlier announcement that it was increasing the fee it charged customers when they make purchases or withdraw money without enough to cover it in their accounts.

The bank had been telling customers that it was raising its overdraft fee to $39 from $35, but that increase was suspended Monday. Although the bank is charging a new, one-time fee of $35 if accounts are negative more than five days, it also announced a more welcome change: If an overdraft causes an account to become negative by $5 or less, the overdraft charge will be $10 instead of $35.

Bank spokesman Jim Pierpoint told Rothacker that the general overdraft increase to $39 was dropped in consideration of the current economic climate, particularly rising unemployment.


Anonymous said...

BOA is stabbing there good customers in the back with this decision. With interest rates as low as they are for non delinquent types, they are forcing us to transfer balances or use other cards. I personally have transfered all my outstanding balances to Chase at 5.4% and will use the BOA card to buy and pay off each month. Then they don't get anything from me.

Anonymous said...

I have 3 cards with B of A. They began raising my rates in October soon after the crash. Last month after my husband lost his job, I contacted them to attempt to work something out. All 3 cards are now at a 30% rate so the payments combined are higher than my mortgage payment. I was told that I would either need to go through Consumer Credit Counseling or just default before they could help me. None of these things are an option for me. I can still make the payments but not if B of A has decided that I can pull them out of the mess they made for themselves by hiking my rates into the stratosphere then charging me fees everytime I'm 5 minutes late posting a payment online. I have begun the process of moving accounts away from B of A to the state credit union and will continue to do so. I cringe everytime I see Ken Lewis on the TV. B of A has lost my business, my goodwill, my loyalty. I have been a customer of theirs for more than 10 years and yet in the downturn I was the first to get trashed and then told "oh well" when I went to them for help. I'm so tired of reading or hearing about how B of A is there for their customers because it is not true.

ann said...

Oy...not this again. A credit card is a right, not a privilege. Spend only what you can afford! If you don't want to pay overdraft fees, you should be aware of how much money you have in your account.

A cap on interest rates would be the worst move at this time (which means it will probably be wildly supported in congress)...banks aren't willing to take risks as it is, and now you want to remove their only incentive to do so? If they cap rates, only people with perfect credit scores will be getting credit cards...careful what you wish for.

Anonymous said...

In the day of electronic payments, there is no real excuse to be late. It isn't that hard to look at my statement- online (or the one mailed to me several weeks before the due date) and pay the bill on time. It does take a bit of discipline- but really- how hard is it to plan out your expenses, especially if you are carrying a balance and have a good idea of what you need to pay each month.

I don't think it is particularly smart for the CC companies to raise people's interest rates... it seems like that will just push some borrowers into default.

But really, you need to be thoughtful about your use of credit and watch these people like hawks. It should not really come as that big of a suprise.

Anonymous said...

Yes, I feel bad for anyone who has credit card debt, and feels the pain of paying it off - I have debt, and I am keeping a lookout for it to get more expensive.

But remember, Credit Card Companies and Banks and Mortgage Lenders are supposed to be businesses. If they don't make money, they won't continue to exist. They don't lend to be kind, they do it to charge interest and make a profit.

This is where they are supposed to be earning their money, not taking bailouts from the government, which translates to my tax dollars. I'm already paying my lenders for my debt - I shouldn't have to pay for anyone else's.

Anonymous said...

Ann speaks like a true BoA banker. BoA will receive the last two payments from me this month and next month, then I will have a zero balance with them, and barring any other way to feed my kids, BoA will never get any future business from me. Ken Lewis and company can go their way, I'm going mine.

Anonymous said...

What does it matter whether the interest rate is 1%, 10% or 100%? The lesson is, don't use credit you can't afford to repay.

Anonymous said...

When did CC interest rates become equivalent to extortion?

Banks and CC companies are businesses, as someone mentioned. Over the last year, as more people have decided not to pay their bills and default (because of various reasons), the ENTIRE portolio of CC customers increases in RISK. When risk increases, interest rates increase. As an extreme example, if you pay your CC bills on time for 20 years, but everyone else defaults, YOUR rates will go up. Nature of the business.

If the interest rates don't go up, banks will not generate the return that is appropriate for the current levels of risk. The bailout investments will be wasted, because they will not be able to properly run their businesses.

Take responsibility for your own decisions.

These inflamatory headlines in this "credit card companies hate you" series are ridiculous.

r0b said...

What's a credit card??? We haven't had one in over 3 years.

Anonymous said...

BofA notified me a year ago that my rate would increase to 29.99% from 5% because I carried a balance for over a year greater than $5K. This was due mostly to family health issues requiring payment immediately. I took the "opt-out" option and cut my card up in the managers office of the unfortunate branch I came to first. I realize the manager did not make the decision, but I had been a customer AND employee for over 20 years. I questioned the director of the credit card issuer on the phone that they were raising my APR to that of the illegal aliens they were issuing $500 cards to, and her answer was "that appears accurate." I no longer have any relationship with BofA.

Anonymous said...

BANK OF AMERICA SUX. How do they stay in business? Wachovia charges ZERO for overdrafts if you have a set balance.

Ken Lewis is an arrogant elitist who paid 50 billion for a worthless Merrill Lynch and after being told he could have bought them for zero he said "then they wouldnt have been be worth anything would they".. trying to defend his stupidity.
There is ZERO customer service and forget ever calling them. You will will be jerked around 10 times before you finally get some operator in Rhode Island who is clueless.

Wachovia customer service is 2nd to none and its too bad they were bought out and the Feds didnt bail them out.

If there is a worst customer service ripoff bank than BOA where are they?

Anonymous said...

everyone should just simply cut up their credit cards, enmasse...

ann said...

aww 9:20, that's too bad that you went into debt and BofA had the nerve to charge you a fee for lending you money! You don't have to work at a bank to believe in the free market...glad you are taking responsibility and paying off your debt and exercising your right to do business where you please.

r0b...funny you ask that question. my dad had a credit card and i never knew that you could carry a balance...i thought it was just an alternative to cash! It wasn't until I was 22 and met someone who had huge debts in college that I discovered people actually spend more than they earn. I guess it just depends on what you are taught growing up!

Anonymous said...

I think it is pretty ridiculous to go from 5% to 30%. The low interest rates encouraged people to use credit. Things you might have done at 5% you would never do at 30%. For example- you might have elected to use home equity or ask a family member for a loan. I suppose you should know better... but then maybe they should be required to say that the 5% you get today could go as high as 50% tomorrow. In big print. Right below the advertised low interest rate.

Anonymous said...

Haven't any of the banking people read the fairy tale about the goose that lays golden eggs. Instead of working with people who are struggeling [the golden goose], they are making it impossible to continue getting out of debt. Higher interest rates are going to kill the geese.

Die Cut Business Cards said...

That's a good news. It gives the people a second chance to use their credit cards wisely. I think those who abused their CCs learned their lesson already.