Chase Bank Announces it will Eliminate Rate Increases Based on Credit Bureau Information
Written by: Kristy Welsh
In November of 2007, Chase Bank announced that as of March 1, 2008, it will no longer increase the interest rates of card members based on their individual credit-bureau information. They join fellow card-issuer Citibank, which also announced earlier this year that they would be eliminating "any time for any reason" fee and rate increases for their customers. The actions taken by these banks represent positive steps in eliminating universal default, a common but often criticized practice. Universal default is when a credit card company raises a customer's interest rate because he or she made a late payment on another, usually unrelated bill.
After March 1, 2008, Chase indicates that they may raise a customer's interest rate if they violate the terms of the cardmember agreement by making a late payment, exceeding their credit limit or by making a payment with insufficient funds. When faced with a rate increase, Chase additionally plans to offer cardholders a way to lower their interest rate through a program called "rate reset". The "rate reset" program is basically an automatic payment plan where the customer must show consecutive on-time payments for a period of 12 months, after which their rate can be "reset" to the original lower rate.
These announcements are positive developments for consumers and the credit card industry as a whole, but much more work needs to be done. For more information on all issues associated with credit, credit scoring and credit cards, order Welsh's book "Good Credit is Sexy".
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