You agree to assume debt with a credit card company at a fixed APR of 9%.

[LeftyFingerPop]

Somewhere in the finer print of your contract, in 2 pt. font, is the statement that the credit card company reserves the right to increase your rate in the future.

A few years after you assume the debt, they raise your rate to 30%.

They tell you if you do not want to pay the 30%, you have the option of closing your account by paying the balance in full.

Of course you are unable to pay either 1) the balance in full, or 2) the minimum monthly payment, because of the more than tripling of your APR.

The credit card company then proceeds to ruin your credit rating.

QUESTION: WHY ISN'T THIS FUCKING EXTORTION????

[HopeHoops]

1. It IS extortion - it is just LEGAL extortion.

And the GOP blocked the Democrats move to prohibit rate increases ahead of the new rules kicking in.

We know who owns the Republicans.

[Naturyl]

2. Because usury isn't wrong when rich people do it.

Much like pretty much anything isn't wrong when rich people do it, or at least "less wrong."

Don't agree? Check out criminal sentencing as indexed to income level...

[jody]

3. Its not extortion when criminals own those who make the laws. The Corporate State is no more moral

than organized crime.

[bertman]

6. It IS organized crime. Has been for quite a while. At least four decades that I can attest to.

[endless october]

4. it is extortion, but they paid good lobbying money to make it legal. nt

[lonestarnot]

5. ruin it now or ruin it later after all those payments, those are some real options.

Wipe your ass on the credit report. Don't bargain with the devil!

[LeftyFingerPop]

7. Where does this stop? With no usury laws, their rate increases...

are only limited by what the consumer credit market will bear.

I wonder at what APR EVERYONE just gives up and defaults.

[mike_c]

8. your "credit rating" is a shackle that many wear proudly...

...announcing their pride at indentured servitude to the banks. Piss on the banks and piss on "credit ratings." Live within your means and "credit ratings" become meaningless distractions in other peoples' lives.

I cut up the last of my consumer credit cards in 2004. I use a debit card now when plastic is appropriate, and I live within my means. The banks can pound sand.

[LeftyFingerPop]

16. I hear you, but unfortunately, your credit rating...

means everything when you buy things like automobiles. Very few of us can pay cash for a new car.

[FatDave]

28. Then buy a used one.

That's what I do now.

[Quantess]

32. I've always bought my vehicles with cash, paid in full.

I've never had a really nice car, but, I do have peace of mind. I never liked the idea of making payments on something that is continually decreasing in value.

[mike_c]

35. I haven't had any trouble financing automobiles....

I've financed two since 2004. No problems.

[scarletwoman]

39. Amazing, isn't it? Great post! (nt)

[notesdev]

9. error

Edit - never mind, mixed up two acronyms

[LiberalAndProud]

10. Unless it means Annual Percentage Rate.

Yes, it really does.

[LeftyFingerPop]

11. Yes that is what it means...both nominal and effective . n/t

[notesdev]

13. oops

I need more coffee

[JVS]

14. Perhaps you're thinking about ARM

Adjustable Rate Mortgage.

[notesdev]

17. Yeah

I don't use credit cards (absolutely terrible deal for the customer IMO), but I have done a lot of work with mortgages, I confused the two.

[LiberalAndProud]

12. Every credit card I have has sent out an increase for APR.

Although they have tried to raise the rate on existing balances, I have opted out of the change in every case where I have high balances and closed the account. I have continued to make the minimum payments as scheduled and my interest rate remains the same. I haven't had a lender demand payment in full to retain my terms. I think we have that much protection under current laws, but I could be mistaken.

[LeftyFingerPop]

15. How did you close the account without paying off the balance? n/t

[LiberalAndProud]

18. By letter.

The address to opt out is always in the rate increase notice. I'm pretty lazy about the phrasing. I reword their opt-out paragraph to let them know that I am opting out and I understand my account will be closed. They send me a letter back to confirm that I've opted out. The funny thing is, even after I've opted out and closed my account, they continue to send me "Changes in Terms" notices. I keep sending the letter back to tell them I am still opting out, and I always try to remind them to stop the nonsense. So far that hasn't worked.

[LeftyFingerPop]

36. Are you saying that they LET you opt out without paying balance in full?

[LiberalAndProud]

40. Yes. That's what I'm saying.

In the opt-out paragraphs of the change in terms notices, payment in full was not a requirement.

[DemBones DemBones]

19. Don't forget that if you ever cancel a credit card, it has

a negative impact on your credit rating. That's even the case if you canceled the card because somebody else had been using your credit card number and you got another card with the same company!

[pitohui]

24. it doesn't really, that's sort of an urban myth

i open and close credit cards all the time, because there are just too many give-aways out there for opening new cards, everything from cash on the barrelhead to airline tickets to 10 percent off the first day's purchases or $50 off at amazon.com, and it goes on and on

no one could possibly use so many credit cards nor keep track of them, so i grab the gimme and then i cancel

no impact on my credit rating whatsoever

i think a lot of these stories are "just so" scare stories to stop people from profiting from opening and closing credit card accounts -- to scare you into being "loyal" to one credit card lender, but it's simply not true


rather than taking my word for it, google around for the blogs/stories of those who "churn" credit cards, you will be amazed and informed, some people take this to the point where it's a nice part-time job

i would say i myself generally get several hundred dollars of goodies a year (usually air tickets for two) without spending any extra money or taking any dings on my credit report -- not maybe a part-time job but still a few extra bucks that looks better in my wallet than in chase bank's wallet

[DemBones DemBones]

29. Urban myth? I wish you'd tell the CC co. that did it to us

that it's "just a scare tactic."

[metapunditedgy]

20. If the gov't really wanted to help, they'd loosen the bankruptcy laws.

It sucks that consumers are too scared to say "f*ck it" to their exploitative creditors.

Think about it... if you're afraid to default on the debt, they can pretty much do anything they want to you, can't they? (Credit card "reform" notwithstanding.)

[smoogatz]

21. AND, even if you pay your balance on time

many cards now charge a quarterly "finance charge," sometimes in addition to annual fees. The thirty day grace period is basically a thing of the past. We've gone almost entirely to debit; we're looking around for a CC we can use exclusively for travel that won't hit is with a bunch of bullshit fees--we have always paid our balances off at the end of the month.

[pitohui]

26. yah it's a 20 day grace period now

fortunately with the rise and rise of the internet, i just get online every week and pay it off right away, or you can set automatic bill pays that pay while you're out of the country, so you really don't have to worry about paying any stupid fees

i don't get as many goodies back with debit, that 1 percent cashback is kinda puny because my "spend" is so low, i'd have to debit $4000 a year to get back $40, but for a $1500 spend on an airline credit card, we get two domestic air tickets (they think domestic includes canada) that can be worth several hundred dollars...i usu. use them for trips to canada, because if i had to buy the tickets from new orleans it would run into real money!

[smoogatz]

37. They might still be charging you a fee,

even if you pay in full every month. There's no law that says they can't, and they can change the terms of your contract anytime they want to. Free miles are good, though we've found it very difficult to use ours, what with blackout dates, etc.

[pitohui]

22. well you may thank ronald reagan for making usury legal

it is amazing how much of the evil in the world goes back to ronald reagan

when i had a balance on my credit cards, i would handle it by also having another line of credit or credit card with no balance, and i would chase "free balance transfers, 6 months at 0 % offers" -- in other words, altho i didn't have the money to pay off the balance, i would switch the balance elsewhere and start over at a 0% interest rate and i'd buy myself another 6 months to find a way to actually get some $$$

the trouble is, in this economy, the credit card companies have finally caught on, and they are not allowing fee-free balance transfers or 0% introductory rates

i don't know what young people do who are starting out now, there were no jobs in the 1980s reagan era either but at least we could live off credit, now thanks to the bush "advances" there are no jobs AND no cheap credit...how do you get started when it comes time to set up your own household???

[MadMaddie]

23. Don't forget there is one other way that Americans are screwed

No one really talks about it but if you close that CC your credit rating is negatively impacted. You lose points for paying the card of and closing the account.

The Credit Agencies all have secret formula's in which they rate every American, can someone tell me why these are for profit companies?

-When the Credit Agency screws up your account they make Americans jump through hoops to get it fixed.
-If you have had identity theft again you have to jump through hoops.
-Americans have to pay to get their credit scores even though everything in our lives revolve around credit scores.
- When you buy a new car, home or anything your credit score drops, why is this? You have managed your money, you have a good credit rating, you pay your bills on time and when you reward yourself you get penalized.
-There are 3 credit agencies with three different scores, again why do Americans have to jump through hoops and pay 3 agencies 3 times to get scores?

This is a huge pet peeve of mine and I never hear anyone address it...:rant:

[pitohui]

27. see post 24, closing yr acct does not cause a negative impact on your credit report

closing yr acct by customer request does NOT put a neg on your credit rating, that's a scare tactic

and apparently a lot of people believe it, but those of us who know it isn't true have been opening and closing credit card accts to our own personal profit for many, many years

also you NEVER have to pay to see a credit score, you are entitled to free reports from the credit reporting agencies every year -- and you can request a free credit report any time your credit is declined

i've never in so long a life ever paid a penny for a credit report

you have been a victim of very aggressive third party advertising campaigns, including national teevee campaigns, that make the unsophisticated consumer believe that a credit report is something you have to pay for

it isn't

and that's a federal reg, not just pitohui saying this

[druidity33]

31. you keep saying that, but it's not true...

there are ways that closing accounts can affect your score.

from:
http://www.bankrate.com/finance/credit-cards/closing-credit-card-dings-credit-score-2.aspx

"Will closing a lesser-used low-limit account help or hurt your score -- that depends, and it depends mostly on how much you owe in relation to your limits on all of your accounts. For example, one of the most heavily weighted factors in the scoring -- and this accounts for about 30 percent of the score -- looks basically at your ratio of balances-to-limits on your credit cards. This is the area we call "amounts owed," if you're familiar with the five areas that the score considers. What's most important in terms of the scoring is credit card debt versus installment debt, such as mortgage or auto loans.

To answer this, it really depends on how much you owe on those accounts. If you close an account, and you don't owe anything on it, that account will no longer be included in that calculation that looks at your balances to limits on your credit cards."



IOW, let's say you have 2 cards, one with a $3,000 limit that you have $1,500 on and one with a $7,000 limit that you have $1,000 on. That's $2,500 out of $10,000 or a 25% debt ratio. Then your 7 thousand card jacks their rate to 30% so you pay it off and close the card. But guess what? Your debt ratio just went to 50% and your credit rating just went down.


As for the free credit report that's certainly true. From what i understand you're entitled to one per year from each agency. (are there 2 or 3?)

[TwixVoy]

25. It is no longer legal as of next year

Next year this is part of the CARD act. It will no longer be legal to increase APRs in this manner on existing balances.

[Snarkoleptic]

30. A few other quick points-

They've devised a thing called "universal default", which means that if you miss a payment on any of your credit accounts, the other credit card companies have the right to raise their rate to the default rate (often 30% or more). Pay one late and they descend on you like a pack of wolves.

As unfair as it sounds, many employers run credit checks as part of a pre-employment background check. Bad credit scores can mean no job.

Furthermore, to maintain professional licenses in many states, you are required to maintain a good credit history. Such professions include insurance producer, investment counselor, securities licenses, mortgage loan originator, etc.

[DU GrovelBot]

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[chill_wind]

34. K & R!

[jtrockville]

38. AND they need your PERMISSION to lower the rate! WTF?

I get SO irritated with the robo-calls telling me they'll lower the interest rate on my card ONLY IF I press 1 and talk to a representative.

They can JACK my rate SKY HIGH without my permission.
So why do they NEED my say-so to LOWER my rate?

[guyton]

41. fraud

um, I think those calls are literally crooks, not the normal banker-style thieves.

[guyton]

42. credit unions

I'm not an expert on such things, but my impression is that getting a credit card with a decent credit union is a lot better than with most banks.

They're not charities, but not nearly the slime buckets that you'll find on Wall Street.