Curbs on credit card practices

[radhak]

Not too early, but at least somebody's paying attention to shylocks of this age :

Credit card crackdown hits in 2010

My favorite impacts what always outraged me :

Credit card companies would not be able to allocate all the money you send them and simply apply it to balances that are being charged the lowest rate.

Say you had a cash advance with a rate of 21% but had a rate of 10% on purchases.

The card company could have put all the money you sent toward items with the lower 10% rate.

"The interest rate clock on the high-rate stuff would keep ticking," Ray said.

Once the rules are in place in 2010, though, the bank would have to allocate money that exceeds the minimum payment to the balance with the highest rate first or spread the amount pro rata among all the balances.

[Uncle Cracker]

It will be interesting to see how the CC companies will react to this, since I doubt they will simply sit still and watch their cash machine break down... It will probably only stiffen their resolve and force them to exploit any remaining loopholes to the fullest.

[jackellis]

It will probably only stiffen their resolve and force them to exploit any remaining loopholes to the fullest.

Fortunately I'm in hiding at the moment and can't be lynched

I own shares in Citigroup and Discover, both of which issue credit cards. Right now their delinquency rate is something like 6%, which means the companies are having to write off 6% of their balances each month. Granted what's left on accounts with balances leaves plenty of profit, but it's a risky business with lots of costs for security, theft prevention, allowances for doubtful accounts.

If there's any gaming, it happens on both sides of the transaction. I can't tell you how many times my wife's sister has signed up for a credit card just to get a freebie, and then cancelled it.

I don't expect anyone to weep for the credit card issuers, but they're not the only ones taking advantage. Issuers could stop making dumb freebies available and credit card users could take some care not to spend beyond their means.

[radhak]

Freebies are what they offer of their own free will. Their offer allows for customers who cancel after the freebie, so they don't mind.

What should not be allowed on either side is deliberate tactic meant to defraud - one way or the other. They should fully prosecute all sorts of fraud and delinquency, but since they decide it's not worth pursuing the deadbeat ex-customer, they instead over-compensate by going after their 'good' customers. That's very like the auto insurance case - in an accident where one of the parties is un-insured, the other party's insurance pays for losses on both sides, and guess who's premium rises because of that?

In all the steps listed in the above article, I could not find even one where there's a bit of gray area : all of them fall in the unfair or manipulative practices. Just because they have the average person in a bind (can't do without a CC, and hence can't get away from them), they have behaved like masters of domain - no accountability. I have always held that many of their commonly accepted methods are pure entrapment .

The fact that these companies are in the black is not even the issue. There's no justification for such practices even for a down-and-out industry. But then, no industry with a captive customer can be down-and-out, can it ?

Yes, they are going to fight back in the way they function best - below the belt. They have already fired the warning shots by claiming that these measures are gonna make them restrict credit to the lowest levels - by income, by history, by circumstances. But that cadre has always been the worst chewed up the cc industry, so unbeknownst to them, this might be a blessing !

[tommyt654]

No Bark to that Bite, Should be retro to 2008 and enacted immediately, Typical Congressional BS.Not looking out for their constituients only for the banks and wall st.

[Uncle Cracker]

If there's any gaming, it happens on both sides of the transaction. I can't tell you how many times my wife's sister has signed up for a credit card just to get a freebie, and then cancelled it.

Your sister-in-law and others like her are not offsetting CC companies who routinely charge 25% interest (on top of interest, on top of interest) when the Fed is charging 0%... And those write-offs the credit companies are taking only serve to reduce their tax liabilities. You are right, I'll not weep for them.

[Ed62]

Even though I know you'll have a hard time paying for the loan I'm about to give you, I'll get what I can out of you. When you go bankrupt, I'll just add my losses (plus book keeping expenses) on to others that owe me money. No sympathy from me either.

Ed

[Daryl]

We live in a wonderful country. The government is running their business so well they have time left over to meddle with private enterprise. I think a bank should apply the payment to the oldest charge, wether it is a high interest charge or a low interest charge.

[cgallery]

Fortunately I'm in hiding at the moment and can't be lynched

But I'll bet you're still receiving "low introductory rate" card offers. You can run, but you can't hide.

I don't have a problem with things like usurious interest rates. As long as people are told ahead of time, it is fair game.

BUT, universal default is bogus. And their games with strategic placement of payment centers so that payments take the longest time possible in the mail is also bogus. I think universal default should be eliminated. And payments should be recorded based on postmarks.

[docrowan]

I personally find most of the tactics used to draw and then hold the average Joe disgusting and on the level of a loan shark. The only difference is they don't send a guy to break your legs if you don't pay up.

Why the heck do we have to wait until 2010 for these practices to be illegal? Perhaps not retroactive, but at least make it effective Jan 1, 2009.

[dkerfoot]

I haven't had a balance on any credit card in over 8 years. This was after digging out from my ex wife's deep debt. Never again.

A wise (and very wealthy) fella once said "The borrower is slave to the lender." Don't wanna be a slave? Stop carrying a balance on your credit cards!

I use credit cards for both personal and business, thank them for my "rewards" and pay the balance in full each and every month. I cost the CC companies money each month and never give them anything in return. A simply don't care what percent interest they are charging.

I have no car payment and owe less than 1/2 year's income on my house (which cost about 1/2 of what the bank wanted to lend me). I live modestly and give more than 10% of my income to charities I believe in. All this while dealing with all the uncertainties and income fluctuations of self-employment.

Freedom from finances is 90% attitude and only 10% income. I know lots of people with much higher household incomes than me who are consumed with financial stress.

If you are financially stressed, I encourage you to Google Dave Ramsey. I had gotten my house in order long before I had ever heard about him, but the man speaks truth. Wouldn't it be nice to simply not care about interest rates?


.

[docrowan]

If you are financially stressed, I encourage you to Google Dave Ramsey. I had gotten my house in order long before I had ever heard about him, but the man speaks truth. Wouldn't it be nice to simply not care about interest rates?

Hey, another Ramseyite!

We took his course twice, then my wife and I taught two rounds of it at our church. About 7 years ago we broke our financial advisor's personal record on date of final payoff for our debt - somewhere around the year 3,000. We're now debt free except for our mortgage. Regrettably we have a 30 year, but I'm looking to drop it to a 20 year or maybe even a 15 year if the interest rates go down to around 4.5%.

We do have one credit card - it is a Shell gas card that we receive 5% cash back on gas purchases. We've never run a balance on it. My company has cut travel budgets and the gas prices have dropped to the point where I told my wife to stop using it until gas prices increase and we see a significant benefit from it. Otherwise, it's a snake in our wallet waiting to bite us. Like you, we don't care what the interest rate is. I've set it up to pull an automatic draft so I'll never have to play the posting date game with the credit card company.

I recently realized that the credit line is much too high for what I use it for - $6,400. I called them to drop it to $2,000. They would only drop it to $5,000. Now I thought there was a credit crunch on - why wouldn't they be eager to reduce their potential credit liability? Hmm, do you think it's because they hope to trap me into buying a toy I can't pay cash for? Gosh, a big company wouldn't do that would they?

[bruce hylton]

No credit card was the reason for me being turned down for a 'home equity loan' some years back. I have never had a personal credit card to date. I refuse to pay a yearly rate to possibly pay interest. I am self employed and keep very good records so that I know where I stand every day[always on the edge, the very edge]. Money does not buy happiness and it is a good thing as I would be very unhappy if it did. If it was possible to borrow from the bank easily, I would hawk my home, my restaurant, my farm ground, my family and the dog to get enough money to spend before I die. And all because I know that I won't be able to cash the check after I die because paper burns.

[dkerfoot]

And all because I know that I won't be able to cash the check after I die because paper burns.

LOL - Personally I don't chase after gold because I figure it will just be used as paving bricks when I am dead. We have similar approaches, though I reckon I am a bit more optimistic than you...

[sparkeyjames]

The thing that I found most disgusting about the CC companies were that they were just indiscriminately raising rates to loan shark levels. Friends who had 7.99% cards were getting raised to 15% a couple who had 15-17% cards got them raised to 29% All had clean credit history no late pays or anything else. CC companies are an anchor around the neck of the American public and the economy. Congress gave them darn near free reign to fleece their customers when they took away the states ability to limit CC interest rates.