Credit card shock - miminum payments may rise abruptly

[babylonsister]

With new credit card rules looming, some cardholders are seeing painful changes
Posted Thursday, Oct. 08, 2009
By BARRY SHLACHTER

[e-mail]



Paul Baker was smacked with a rude surprise when he opened a notice from his bank informing him that his minimum monthly payment had skyrocketed from $560 to more than $1,300.

The 31-year-old Stephenville man didn’t have one of those toxic subprime mortgages with a teaser rate that suddenly reset. It was a Chase Freedom credit card.

"The payments are now bigger than my mortgage," said Baker, who used the card to help fund his educational-toy business.

Chase didn’t alter the 4.9 percent interest rate. Instead, it ratcheted up his minimum payment from 2 percent of principal to 5 percent.

Baker is not alone.

Major banks are scrambling to cull their least profitable cardholders by making terms difficult or by raising interest rates before the new credit card reform bill takes effect Feb. 1, said Mitch Franklin, an assistant professor of accounting at Syracuse University’s Whitman School of Management.

"I know people who have 800 credit scores getting their line of credit cut," Franklin said in a call from New York. A credit score over 750 is generally considered strong.

Aside from higher rates and increased minimum payments, consumers have complained of fixed rates being changed to variable rates; new fees; a decline in new offers; and fewer rebates and rewards, said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.

"Why is this happening? Some think that the issuers want to get in front of the new rules that will be imposed on them in 2010," Cunningham said. "Others think that it is due to creditors being on the ropes financially and wanting to decrease their risk while getting any outstanding debt repaid as quickly as possible."

more...

http://www.star-telegram.com/804/story/1669642.html

[villager]

1. Shouldn't we be shocking them back with a credit card strike?

n/t

[notadmblnd]

3. I sorta did that.

I imagine they were shocked when I stopped paying it.

[Joe Fields]

4. It would be one of my most fervent wishes, for all Americans to call

their credit companies and tell them that THEY are the ones cutting the company off. Shred the cards and pay the bills off.

Fuck all of those jackals.

[jimlup]

27. Thanks - I've been advocating this for a couple of months

I think it is probably the only way - honestly. We need to start to show them who is boss - they'll freak quickly. They don't have any reserve but we do.

[TxRider]

29. I am, I immediately paid in full and cancelled my cards when they hiked me

Fuck em.

I can live without convenient credit and their assraping charges.

[dugaresa]

2. i know another small business affected by this

two people who started a restaurant but used personal credit cards to pay for renovations. the business was slowly ramping up and doing okay and they were making their payments plus some but just recently the credit card minimum payment skyrocketed and now they are contemplating letting it go and the one partner may file bankruptcy.

[customerserviceguy]

13. It's just financially irresponsible

to use your credit cards for a business loan. If you have a solid business plan and/or a track record, you should be able to borrow money at a reasonable rate with a fixed payment plan. If you cannot do that, then you get into the use of credit cards, and hold the gun to your own head with them, because you don't have a sound business plan to pay back a loan.

[pitohui]

16. you are just plain naive

there are many businesses that even if you have a solid business plan/track record and you are profitable, you cannot borrow money "at a reasonable rate w. a fixed payment plan" because your entire industry is on the "we'll loan shark your ass" list

i feel sometimes like i've worked in them all -- gambling, porn, writing -- and you know what? i've never had a late payment

but if i had not used a credit card to fund my start up i would be dead now because there would have been literally no way for me to earn money in any "legitimate" "ask nice, boys" way

people who jump thru hoops and have a nice business plan to get your business loan and what is their plan? oh yeah to open another subways or dollar general and work for $10K a year and they're a better risk than me

got it

dude, no offense, but your post is an insult to my intelligence

now if you're trying to say STUPID PEOPLE shouldn't borrow money on a credit card, i fully agree...but smart people from bad (not connected to wealthy elite) backgrounds have to take on debt to get started because we're not willing to fuck people for money and we weren't given the option to have a rich co-signer parent for money

credit card debt can be the BEST debt there is because it can be cleared in bankruptcy (unlike student loan debt or IRS debt) and because there's no collateral (you don't sign your car/house away to take the risk of starting a business)

i would likely be a crack dealer now or something if not for taking on (and eventually paying off when i enjoyed success) credit card debt -- no "customerserviceguy" was ever gonna help me out or take a chance on me unless i gave him a blow job, or a LOT of blowjobs

[customerserviceguy]

24. I will agree with one thing that you've said

and that is the fact that credit card debt can be cleared on a bankruptcy, while secured loans cannot be. Hence, people trying to finance their businesses with credit cards are gaming the system for a win-win situation where they either make a profit, or can leave someone else holding the bag. And that affects rates for the rest of us.

I really couldn't figure out anything else that made any sense from your rambling response to counter with facts.

[Scout]

5. just set up a program with a debt management company today....

it's been coming on for a while, struggling to keep our heads above water by ourselves.

one of the final straws was the notice from Citi that our current account, which originally had 0% interest because it was a balance transfer, but was raised when we had a late payment ... now is 18.99% and they are raising it to 25.99% or we can close the account to "lock-in" the 18.99% rate.

i don't have a problem paying a late fee if i'm late on a payment, and i know i agreed to the outrageous terms (desperate people do desperate/stupid things) but it really chaps my ass to the nth degree when they jack the interest on a balance of thousands when you are late with a payment of say, $350. :grr:

then they have the gall to tell you that they jacked your rate because you are a greater risk!!! i'm not a risk of ANYTHING except them making a few extra bucks on a late payment now and then ... i can make the payments until they jack the interest so high that you just can't afford the monthly payment.

[Deja Q]

6. If $560 is 2%, that's one big-ass total bill.

I've got some debt of my own, like who doesn't, but that's a HUGE hike.

Still, it gets debt paid off more quickly. Not entirely a BAD happenstance...

[customerserviceguy]

12. Yep, it's about $27K

and if you're silly enough to accumulate that much debt on a credit card, then you might deserve whatever the robber-baron banks do to you.

At least he gets to keep his ridiculously low interest rate, despite his financial mismanagement that got him into this position.

[pitohui]

17. silly? he started a business? what business did you ever start w. a mere 27K?

i love it when people who don't know fuck all talk about it anyway

i have to admit "educational toy" business is not a business that springs to my mind, maybe i've got my mind in the gutter, but $27K is a v. small risk to take

at the v. worst if his business fails, he declares bankruptcy and starts again

if he spent $27K on student loans-- today it's more likely to be $127K -- he could v. well be without a job AND unable to discharge the debt thru bankruptcy (it's close to impossible to discharge student loan debt)

he did nothing wrong, most start-ups do fail, but if his worst result is he owes less than $600 a month, and he's an energetic guy looking for opportunities...he'll be better off than 90 percent of the posters on this board, he'll be just fine -- he made an intelligent decision

[customerserviceguy]

25. Ok, you said something else I can agree with

Student loans and credit card loans to start a business are both very risky ventures. Frankly, the costs of making them end up costing other people money who get left holding the bag.

[customerserviceguy]

26. Also, I have to add

I've started up my own tax practice some years ago. I did it out of my home, using very little capital to create a business that grew from about a dozen clients in 1981 to about three hundred in 1990. Of course, the tax simplification of the Reagan tax acts cut a hole in my bag of tricks, and about all I could do for folks by 1990 was to sit down, hold hands with them, and cry.

And many of them had businesses that they tried risky financing schemes with. I managed to learn a lot from other people's mistakes.

[Skink]

7. this could be bad for the Christmas shopping season.

It's like these companies saying pay now because we know you won't pay later.

[endless october]

8. with an APR above 24 percent...

...i will be hesitant to ever charge anything and not pay it off that month ever again.

[SoCalDem]

9. I used to laugh at my friend who would scour ads to save 15%

only to buy a bunch of stuff and use a credit card...then take months to pay it off..

so much for "saving" money:)

she would also drive all over town to find gas stations that had gas for 1 cent less:) I reminded her that at 16 gallons a fill up, she was saving a whopping 16 cents for wasting 30 minutes and however much gas she burned while getting there:)

Whenever she was driving somewhere, with me as a passenger, I would always hand her a dollar, and ask her to fill up at the Mobil near my house:)..or I would fill it for her on my gas card sometimes:)

[pitohui]

19. well played, friend of socaldem, well played

you assume that she does the same when you're not around, hell no, she's playing you to get that free gas and i for one don't blame her, you sort of invite it

i've had that scam pulled on me but since i don't bore easily and like riding around in circles then they don't profit when it's me in the car. :-)

[SoCalDem]

20. You don't know her husband

what a bastard he was.. he had a NOTEBOOK in the glove compartment.. made her write down the mileage and the price she paid every time...and even made her account for what she paid for the boys' haircuts.. he once read her the riot act over spending SEVEN dollars for their haircuts, when she could have gone on base and had it cut for $6...


he choreographed every day off she had, with all his pissy "errands"..

a penny-pinching miserly bastard :)

[TxRider]

30. Shock! He had a budget and tracked all the spent money!

It's outrageous I tell you!

[mullard12ax7]

10. I'm sure the people who let war criminals go will solidly address banking criminals

in some fictitious propaganda-world that American citizens are supposed to believe.

[ddeclue]

11. This will start a genuine peasants with pitchforks revolution that will back fire on the CC companys

If this happens to me I'll be bringing it up with about 5 Florida Congressmen, 1 U.S. Senator, 1 State Senator, 3 State Reps and the State CFO along with any media people I can get the attention of.

[TxRider]

31. Easier to just cancel you CC and boycott them

[BK101]

14. Credit Cards Suck

The APRs they charge initially sucker you in.

[bigwillq]

15. Hello.

Welcome to DU! :hi:

[pitohui]

18. well my friend they don't handcuff you

i lived for (an embarrassing length of time) getting started on switching from one zero percent interest loan to another

would you rather i have lived on the taxpayer tit/food stamps and popping out babies to qualify for welfare?

there is no law that says you only have to apply for one credit card, you enjoy the 6 month intro rate, then you move onto the next card with ITS 6 month intro rate and so forth and so on

over the last 25 years i've made thousands in cash backs and gifts (such as free airline tix) by switching cards

why doesn't everybody do this?

true if you're stupid, credit cards suck, but if you're smart, credit cards are a tool, just the same as if you're stupid, guns get you put in prison, but if you're smart, guns are a lot of fun and/or save your ass

[TexasObserver]

21. Recommend

[Statistical]

22. Short term it is going to suck but long term....

I think it is a good idea. If I were in Congress I would set the minimum "minimum payment" at an amount calculated that with current interest rate and no new charges the balance would be paid off in 3 years.

[anigbrowl]

28. agreed, moving from 5% to 2% in the 90s was a bad thing for consumers

[depakid]

23. Heck of a job, Demcrats.

Had a populist issue and threw it away to the banksters.