'RATE-JACKING' Info / Exposé

[Sultan]

[This is well worth taking the time to read]

I have some very interesting opinions & knowledge on this subject I'd like to share with everyone.

As many of us are aware Credit Card Companies can increase our interest rate at will with out rhyme or reason, thus the term 'Rate-Jack'

It seems that the credit card companies, (some of the more notable are Chase, & former MBNA to name a couple) often practice this shady predatory tactic to card holders.

The biggest thing in my opinion is that these 'Credit Card Companies' make their own rules, they have little to no government accountability and very little compliance and enforceability, where they absolutely should! this hurts us all heavily, my hope is that more and more people will become aware of this fact and make enough noise that something will eventually be done.

Here's a '>link to some stories about this jacking BS. The general theme of most of the stories I read was that "Chase was justifying this by reviewing peoples credit reports and card holders had utilized a large portion of their available credit making them a 'bad risk'

OK STOP RIGHT THERE. (it's true this is what they often claim, Chase and many others alike)

Lets all do some no-brainer logic; If someone is a bad risk because they've utilized a substantial portion of their available credit (and on behalf of the credit card companies, higher balances on other cards and such mean more payments and could potentially increase the risks) however, is anyone else familiar with the term 'cutting off your nose to spite your face?' - how about 'shooting yourself in the foot' - (this is what these companies are doing when they 'Rate-Jack' card holders)

OK if someone is having a hard time making payments or even an increased risk (at best/worse) how would doubling/tippling/quadrupling the interest rate help eliminate an increased risk factor? - The answer is it doesn't at all.

Think about what I'm saying, hypothetically; how would someone who's squeaking by on their budget paying say $500.00 per mo. On CC debt who receives one of these 'Rate-Jack' (often arbitrary) who now has a monthly payment amount of $750.00 (or higher) or even $600.00. - In many cases card holders can't

When these companies do this does it really make any sense? - Everyone shake your heads and say "NO"

The bottom line and truth of it has nothing to do with us being a bad risk, for those who haven't figured it out I'll lay it out in black and white, what it really is; is that the credit card companies have likely done an account review and noticed that a card holders credit utilization is moderate to high and that their scores have dropped as a result and because of this they can un-ethically increase the rate because the card holder is now at their 'MERCY' because of the lower scores the card holder will likely not be able to apply for a new card or loan immediately and either balance transfer or pay off the existing credit card with the now higher rate, often double/triple/quadruple the amount of interest of what it was before the rate increase.

It's also important to understand how minimum Credit Card payments are calculated, they are a combination of both a percentage of the amount owed as well as the amount of the calculated interest, higher interest can often double or triple a minimum payment if the balance is substantial.

Does everyone see what they're pulling on us here and why they can get away with it? Lets bottom line it,

The do this because they can and virtually always get away with it (especially when the stakes are lower, ETA: non-substantial total balances - less than 10K total - any amounts higher may result in a suit by a savvy/educated consumer as an alternative to throwing in the towel) They do this because they are like an opportunistic disease who infects the host when they are vulnerable and weak, not because card holders are an increased risk, as good as that sounds for them, it's simply a manipulation of the broken system in place.

They can and often do this pushing people over the edge into bankruptcy then the rest of the creditors (even those who are less predatory and keep their agreements and rates) often end up losing out as well, you would think as an example American Express would be highly upset / disgusted (even possibly have legal recourse) against Chase or Citi for putting someone in a predicament of forced BK by these slime-ball predatory tactics. GIVE THAT SOME THOUGHT AS WELL.

Thus the reform and enactment of laws would be good for all parties involved.

Footnote; hopefully BOA (who now owns MBNA) will never employ the nasty tricks that caused MBNA shares to drop so heavily that they had to be swallowed up or fold.

[divemedic]

BofA is already doing it. I had my BofA card rate raised to 21% for the simple reason that when I bought my house, I charged up 2 of my cards to about 45% utilization to cover moving expenses.

[Sultan]

BofA is already doing it. I had my BofA card rate raised to 21% for the simple reason that when I bought my house, I charged up 2 of my cards to about 45% utilization to cover moving expenses.

I'm not surprised since they have been letting former MBNA headquarters in Wilmington run most of their Credit Card division.

divemedic, you might consider contacting retention in Arizona.

When I've dealt with BOA lately my first question to the CSR's is always are you an original BOA employee or part of the merger. I have direct contact numbers for retention in Arizona if you need them, let me know.

[Sultan]

Don't be afraid to comment on this people, (even just to say, bump or thx) lets try to keep it on the first page for the summer, seriously. Indispensable info in this thread.

[justincase]

Thanks for the info Sultan!!! Everyone should be aware of these companies that are in the practice of what you have posted. I plan on applying for cc with BB&T here in Maryland, I found out they are North Carolina based and are more conservative than most major banks and they don't farm out their CC division everything is in house with none of that universal default bullsh*t.

[cajunbulldog]

This is just an illustration to always have a backup plan.I had hoped Congress critters had scared some of them,not yet I guess.

[cracrap]

got the letter in the mail today..my former mbna card is going to 21% from 8.99%

.....RATEJACKED:evil:

[CleverCynic]

I tend to think that we all forget that credit cards are really just bad news all around and always have been, especially for anyone that actually needed one. They were the ORIGINAL payday loans, and interest rates have only increased since the world has been on to them.

Hopefully everyone on this site realizes we use credit cards to properly play the game and diversify our credit sources for the things we really need to finance down the road and the cliche "for emergencies only".

If you really need $200 to finance some item, you're really not going to be able to hold onto good credit for very long. Stirling credit really is for people who don't need it after all.

[hiblues]

I think the Senate is talking about this issue and is contemplating to revamp of the law....

unless of course, the republiCONS block it or the democRATs are paid off by the corrupt

CC companies.

Email your senator... it's the very least

an American can do...

Click Here for a list of the Senate

but few will ..... and they'll just keep bitching...

[momof5]

Credit Sultan,

I love it and I have been telling folks that for YEARS! When you have someone who has maxed their cc's, you rate jack them, you will most likely force them into BK.

Many times, maxing out cards is temporary....like I am at 95% util because my contract ended. I lived on savings and credit for the past 2 mo. I just accepted a job offer at 2X what I had been earning!! It will take only 2 - 3 mo to pay off all my cc's while building my savings acct back up!

To an extent, I was a higher risk during the past 2 mo (no real income - only unemployment), but I was not in danger of NOT being hired.....it just takes time.

There is an even bigger issue with the low limit cards. It is hard to charge anything that won't screw with your util! Then they rate jack you because you used the card! Whatever!!!

CC's are a scam to see what they can get out of your wallet, not what's in it! Min payments are 99% interest.....but young folks don't realize this and nobody teaches them! (Unless they are children of CIC.)

[IHateCAs]

I tend to think that we all forget that credit cards are really just bad news all around and always have been, especially for anyone that actually needed one. They were the ORIGINAL payday loans, and interest rates have only increased since the world has been on to them.

Hopefully everyone on this site realizes we use credit cards to properly play the game and diversify our credit sources for the things we really need to finance down the road and the cliche "for emergencies only".

If you really need $200 to finance some item, you're really not going to be able to hold onto good credit for very long. Stirling credit really is for people who don't need it after all.

Sterling credit is for people trying to make money through high leverage (which is the best way to do it).

It's not for people who don't need it. If you don't need it, there's no point in getting it. However there is a good reason to need sterling credit other than purchasing a home or car.

[IHateCAs]

I suppose what I dislike most about CCHAs is that it's basically a one way contract. The consumer must abide by it completely and the bank gets to change the terms at will at any time. I don't have a problem with them reevaluating risk and staying on top of market rates, but it's ridiculous. A comparable would be ARMs on home loans. Yes they can change the rates, but the agreement includes lifetime caps and they can only reevaluate during given intervals.

I'm not sure legislation is the best way to fix it, because they tend to overreact and screw things up. But a system that went along the lines of:

1) starting rate is 8.99%

2) it is adjustable based on reevaluation of your credit and the market

3) we can only reevaluate every 6 months and can't raise your rate more than 1% at a time

4) it has a lifetime cap of +6% over your current rate (can't go any higher than 14.99% in this example)

So it would take then 3 years to get to the max APR, which is usually how long the contract is good for anyway. If the rates need to be that much higher, than can do the equivalent of raising your rent (starting 7/3/2010 your new rate will be 15.99%, if you don't like it you can close the card).

It's less risky than home loans, which are locked in for 30 years. They would only be locked into a given rate for no more than 2-3 years.

The contracts don't really restrict the lender in any way, because they can raise rates, lower limits or cancel the card at any time. It allows them to be a predator, and wait until you make a large purchase that won't be repayable in the short term and then jack your rates up to a high level so the interest rolls in.

That low rate that you get the card at is really an unspoken "this is your rate based on you making averaged sized purchases that you can pay off reasonably fast. Once you're lulled into a false sense of security and make several large purchases at Home Depot to remodel your kitchen, we're gonna crush you underfoot with a 20.99% interest rate".

It's deceptive.

[Sultan]

Good discussion, good input people.

IMO, and experience, not all companies employ the nasty tricks that make people cringe and feel contempt toward the CC companies.

I've had really good experience with Amex, BOA and some of my other cards, another thing people really need to be aware of is credit unions, they do not 'Rate Jack' I have a nice 9.9 fixed (and high limit) on my Pentagon Federal CU card, when I receive mail labeled 'important notice enclosed' I never have to give it a second thought that it might be bad news. Navy Federal is also really good. (A little harder to get in though)

ITA about the over reacting to fix things, they usually tend to level back out though eventually, right now it's a broken system at best, I really hope people can see the entire spectrum this is not a black and white issue.

I can't stress enough how much better off we are with credit unions, heck Penfed doesn't even charge me a different rate or fee for cash advances if I wanted to take the whole 20K in cash I can with no penalty.

IMO it's good to have a balance of prime revolving trade lines and at least 2 or 3 credit union TL's.

[Sultan]

I think the Senate is talking about this issue and is contemplating to revamp of the law....

unless of course, the republiCONS block it or the democRATs are paid off by the corrupt

CC companies.

Email your senator... it's the very least

an American can do...

Click Here for a list of the Senate

but few will ..... and they'll just keep bitching...

Awesome! I agree, (It's high time we take a stand) we can also write our congressman. Hows the weather is Hawaii?

[Sultan]

Credit Sultan,

I love it and I have been telling folks that for YEARS! When you have someone who has maxed their cc's, you rate jack them, you will most likely force them into BK.

WORD!

There is an even bigger issue with the low limit cards. It is hard to charge anything that won't screw with your util! Then they rate jack you because you used the card! Whatever!!!

TRUTH!

CC's are a scam to see what they can get out of your wallet, not what's in it! Min payments are 99% interest.....but young folks don't realize this and nobody teaches them! (Unless they are children of CIC.)

NO, I LOVE IT!

[Sultan]

BUMP for those who missed this the first time around

[divemedic]

Actually, I think that a change in interest should only apply if written notice is sent to the debtor, and will only apply if charges are made more than 5 business days after the written notice is sent to the debtor.

This unilateral contract that companies are doing is BS. I am tired of cell phone companies and CC companies screwing people with these open-ended, mandatory arbitration clause contracts.

No more contracts for me, no more CC balances.

[jq26]

...no more CC balances.

Best way to solve this problem. Some people think they are powerless, but when one has the availability to close any account that attempts to rate jack them, then that is the best way to prevent it. They either back off or lose a customer.

[Sultan]

Best way to solve this problem. Some people think they are powerless, but when one has the availability to close any account that attempts to rate jack them, then that is the best way to prevent it. They either back off or lose a customer.

By rights we're supposed to be given notice and allowed a chance to close the card (even if it has a balance on it) to lock in the rate before an increase, in reality many companies bump the rates at will with out notice and often arbitrarily.

Basically bait and switch or otherwise known as predatory lending, rather than having an oh well thats just the way it is mentality I firmly believe that we need sanctions and implementations to protect the consumer in this era of an all time high of consumer debt. These turkeys don't realize they're kicking dirt on themselves as well by causing the machine to break down on a large scale.

[rella5]

creditors that is. Rate jacking, over limit and late fees are what indirectly drove me to CIC. Yes I know I am the one who used those cards but if not for the universal default etc etc I might have been able to maintain.

All of us who visit CIC have different reasons and goals. I applaud and respect each and every one. But I am working towards total abstinence. My way of fighting these guys is to quit. Unless it is a matter of life or death I will not have another credit card. They and no one else will have this kind of power over me ever again. AS GOD IS MY WITNESS!... *said Scarlett*

I'm selling out, moving to a tropical island and run a margarita stand....

[Sultan]

Once again IMO the idea here is to use revolving credit to our advantage, there are a good deal of people who use low interest fixed rate cards, excellent balance transfer offers and rewards to their advantage, if you understand & play the game right (as an example) you can beat almost any HELOC/LOC rate with revolving credit

Others have been known to take advantage of the right offers and invest the money into high yield investment returns. Seriously give this some thought while we're on the subject.

I ask everyone; what is wrong with us using their money benefit ourselves?

Lastly remember Credit Unions and certain credits do not play these games that Chase, Wamu/Providian, former MBNA, etc. play by policy.

Amex doesn't seem to be one to play the rate jack game, though they have their own version of shenanigans, ETA: F/R's CLD's and such.

[CleverCynic]

AMEX isn't taken everywhere, so they'd be getting a bit big for their breeches to disenfranchise card holders as well. Apparently they sock it to the vendors more than VISA/MC.

[Sultan]

AMEX isn't taken everywhere, so they'd be getting a bit big for their breeches to disenfranchise card holders as well. Apparently they sock it to the vendors more than VISA/MC.

All true, they actually aren't taken everywhere, and they do have the highest merchant fee's several percent more than Visa/MC/Discover.

Also note that they are now more widely accepted than ever and have far surpassed discover, more places now take Amex than at any other time in history. Amex even sells its brand to third parties like BOA & Citi bank.

Amex does as I said do other weird stuff like financial reviews where they require proof of your tax returns to allow you to keep the credit they've already extended you, makes very little sense, but its part of their risk management, seems like they might ask that up front too, but then many people would say shine them all together I imagine.

Amex also had a glitch on their website where you could reallocate your credit from one card to another then hit the request CLI button and it would put the card that had moved its credit line right back to point A. It's called 'dancing' and lots of lamers were doing it and bragging about it and abusing the Amex system and might have been the reason behind the inclusion & onslaught of the dreaded F/R/s. I mean c'mon who wants to provide a full doc proof of income for a credit card? for a home loan/major purchase sure.

[Sultan]

Another bump.

I said I was going to try to keep this up front for most of the summer-

[Sultan]

Another bump.

I said I was going to try to keep this up front for most of the summer-

(double post)