What's up wth all the CC Apr increases here lately ?

[tmac01]

I have had 5 CC co. send me letters stating " due to the economic hard times we are raising the apr of your CC to yahdi yahdi yahdi !!!! " I have good credit a good salary and no lates on my CR and they first lower my CL's now they are raising APRs ? WTH I mean when is enough enough from these Banks !!!!! Anyone else having this happen to them ?

[jq26]

tmac, you can thank Congress. This is a result of the new rules being implemented on banks. The simple fact is that most users of credit cards are not very profitable if you pay on time and pay off your balance. The banks were depending on many with less than stellar credit and payment histories to subsidize those who are great credit customers.

Now banks are forced to eliminate much of the fees and interest they depended on. In return, banks are jacking up rates.

IMO, there are going to be wholesale credit card account closures in the near future. So just hang onto what you have as long as there are no annual fees. And make sure that you don't carry balances!!

[tmac01]

yeah I have a few CC's with balances but the only CC that has not jacked me around was my CU ! Thanks jq26

[thomassl]

Last week I also received a letter from my Citicard stating the same thing about the economy and they will be raising my interest rate to 29.999% starting on November 30th of this year! My account is not delinquent and just about two months ago, I had to battle them over their error which sent my rate up from 11% to 24%! They fixed the problem only to come back two months later with this "economy" excuse. I don't ever plan to use this card at this rate and will opt out of it. There was just a recent article on MSN Money last week about the banks starting this before the changes hit in February!

[deep-n-debt]

So is there nothing that can be negotiated with the credit card company to lower the rate? My daughter, which DID fall far from the tree (me, lol) has always been very responsible with her money. She is almost 25, works a full time job and is a full time student. She is using these cc's a little bit to fill the gap when her job doesn't meet her financial needs. Now they have jacked her rate up to almost 30%. She is going under , and FAST. This is ridiculous. She can't keep up with this and maintain her studies, job, regular monthly expenses....etc.

Does anyone know if she were to address them in writing to lower the rate, if that does any good. I suppose if it did, everyone would be doing that right? Well there has to be something she can do to fight these rate increases.

Does anyone have solid advice??

Thank you in advance.

[jq26]

You can typically opt out of the increase. The card will no longer be able to be used and payments would be made at the current apr until paid off.

I'd call the credit card company and explain the situation. They do not want to see a default either. I've heard of them working with customers and even dropping interest rates to avoid defaults. But she'd probably have to agree to close the card to receive special rates.

[tmac01]

Originally Posted by deep-n-debt

So is there nothing that can be negotiated with the credit card company to lower the rate? My daughter, which DID fall far from the tree (me, lol) has always been very responsible with her money. She is almost 25, works a full time job and is a full time student. She is using these cc's a little bit to fill the gap when her job doesn't meet her financial needs. Now they have jacked her rate up to almost 30%. She is going under , and FAST. This is ridiculous. She can't keep up with this and maintain her studies, job, regular monthly expenses....etc.

Does anyone know if she were to address them in writing to lower the rate, if that does any good. I suppose if it did, everyone would be doing that right? Well there has to be something she can do to fight these rate increases.

Does anyone have solid advice??

Thank you in advance.

I saw a great documentary about this called Maxxed Out and these CC Co's go right at students who they know can't pay once they raise that interest rate. They thrive off of late payment fees and do what they can to squeeze every penny out of these students. It's really sad because some students have to quit school and even some committed suicide over this. I'm not trying to say your daughter would do this but if she needs a CC and her rate is going up I would recommend like jq 26 said to opt out then have her deal only with a CU as they have the best rates and will not jack her around....Good Luck

[jq26]

There is an element of truth to that. By the time I graduated college, I had an affiliated platinum card with a $12,000 limit, no job, and no way to pay back the $7000 that was on it. I carried that growing balance until BK at age 26.

Not sure who was more of an idiot- the alumni squeezing their future graduates for what probably amounted to a hundred dollar kickback into the alumni fund OR me for taking my "free" beach towel in exchange for years of debt service.

[Bigwoodystyl]

Originally Posted by deep-n-debt

My daughter, which DID fall far from the tree (me, lol) has always been very responsible with her money. She is almost 25, works a full time job and is a full time student.
...

She is using these cc's a little bit to fill the gap when her job doesn't meet her financial needs.

Those statements are contradictory. Using credit cards to "fill the gap" is terribly irresponsible. The sooner she realizes that, the better off she'll be.

This is the precise reason why her APR must be raised immediately (because as she continues to "fill the gap" her risk score depreciates with an alacrity that few borrowers realize until it's already too late).

Originally Posted by deep-n-debt

Does anyone have solid advice??

There is no great secret.

Live beneath your means, save the excess and get off the debt treadmill.

[Bigwoodystyl]

Originally Posted by jq26

tmac, you can thank Congress. This is a result of the new rules being implemented on banks. The simple fact is that most users of credit cards are not very profitable if you pay on time and pay off your balance. The banks were depending on many with less than stellar credit and payment histories to subsidize those who are great credit customers.

Now banks are forced to eliminate much of the fees and interest they depended on. In return, banks are jacking up rates.

I disagree with that. Banks are not raising the rates on less than prime borrowers in order to subsidize the accounts of prime borrowers. Instead, they are raising rates on subprime borrowers out of necessity in order to account for the cost of doing business with them in the first place. Further, they are doing so out in front of legislation which will soon make dealing with less than prime borrowers hugely unprofitable. Very soon, if you don't have perfect credit, you will not be able to own a credit card. Many who have been working to restore their credit will not find credit limits slashed or rates raised, but instead will find their accounts have been permanently closed.

Contrary to popular belief, banks would rather have every customer PIF by the due date. Zero risk means less capital necessary to back credit card bonds. And, it also means AAA paper they can sell at higher rates. Further, it would eliminate a lot of the cost of doing business of Collections, Recovery, Legal, etc. Smart (read: good) underwriting downgrades risk. Further, credit cards were once looked at only as a tool to further strengthen customer relationships. It wasn't that long ago that one had to have a deposit account at an institution in order to even think about applying for a credit card there.

Banks do turn a profit on their good credit card customers and at almost zero level of risk. In theory, banks could have an unlimited number of these customers and they would always turn a profit.

Several years ago, in a practical, real-world sense, there were/are those who are financially illiterate and are willing to carry a balance month-to-month, letting that balance rise ever closer to the limit, treating the credit account as an extension of their income, or as a "plastic loan". These accounts are headed to charge off and everyone knows it months before it happens except the customer who is usually in denial. The only way banks can hope to make any money off these people is by really raising up their fees in the hopes that the customers will continue to make minimum payments long enough that the cost of doing business with them breaks even. You can argue that this rate-jacking is what causes the customers to charge off in the first place, but you'd be wrong. These are the types of customers who will borrow every penny they can, b/c they have no discipline. If the banks didn't raise the fees, these cardholders would continue to make the minimum payment and rise ever closer to the limit still, and they would charge off anyway, albeit about a year later.

In so doing this, there are others in the above-mentioned class of account holders who live for years teetering on the edge of dispair, but always carrying a balance and always paying hundreds of dollars per month in interest. These are the customers who made credit card lending insanely profitable. These are the customers who will get an occasional fee-waiver or be given the opportunity to "skip-a-payment". These are the customers who when they threaten to close their accounts are given slightly better terms to stick around. The banks do love these customers, but only b/c they have to given the remaining demographics of their account holders.

From an underwriting perspective, one can't predict who will do this. And, extending credit to customers who aren't worthy borrowers in the hopes of uncovering one of these above-mentioned profitable customers is absolutely shoddy underwriting and a poor way to manage risk. That has been borne out in the subprime debacle.

Banks are paying for this now, and have started the process of rectifying this poor underwriting by lowering limits and raising rates. Soon, their accounts will be wholly closed as well. It's only a logical step, considering the pending legislation that essentially punishes banks for trying to do business with less than prime borrowers.