Mar 18, 2009 6:34 am US/Eastern
'Curious' About Credit Card Interest Rates
BOSTON (WBZ) ―
If you look closely at your credit card statement, you might find an unexpected and unpleasant change. More companies are implementing higher fees and shorter billing cycles, and they are doing it without much warning.
It's a frustrating situation for Julie from Stoughton. She asked on our "Curiosity" Web site, "Why credit card companies are raising rates on people who pay their bills on time. This is not fair."
CREDIT LINES BEING CUT
As the economic meltdown puts the pinch on banks and credit card companies, they are squeezing customers. This is even affecting card members who have never missed a payment, like Kevin Johnson.
When he got back from a honeymoon in Jamaica, Johnson had a letter from American Express waiting for him. They had cut his line of credit by more than half. Johnson says one of the reasons stated on the letter was that other customers who shop at establishments he had frequented had bad payment histories with American Express. "I thought it was blatant discrimination at the very least, guilt by association."
American Express would not comment specifically on Johnson's case. In a statement, a spokesperson did say that they constantly review the status of their card members, and that those evaluations are becoming increasingly targeted in these difficult economic times.
COMPLAINTS ON THE RISE
Complaints like Johnson's are popping up all over the web on sites such as
ChangeInTerms.com as angry consumers vent about having the terms of their cards changed for what they see as no reason at all.
Amy from Hull is one of those mad card holders. She also wrote into our "Curious" Web site, saying "I had a fixed rate of 13.99 percent, but they tell that if I continue to use the card I'm going to get charged 25.49 percent. Is that legal?"
We put that question to Susan Kaplan, a financial planner in Newton. She said "They can change the billing cycle, the late payments penalty. They can change the actual interest rate on the credit card, and usually in the small print, they allude to all the things they have the ability to change."
New consumer protection laws go into effect next year, and abrupt changes without ample notification will no longer be allowed. But there is still a lot of time between now, and when those regulations go into effect.
Kaplan suspects that credit card fees and rates will go up enormously before the end of the year. That way the credit card companies "don't have to call it a change when they want to raise the rates." For that reason, she suggests consumers interested in getting a new card do it now, before those changes are put in place.
READ YOUR STATEMENTS
It's a warning for everyone to pay close attention to their statements each month. Johnson is so frustrated by his experience that he started a new Web site,
NewCreditRules.com. "People like me, who have excellent credit, pristine payment histories, are getting thrown under the bus as it were, and again, I think that a lot of the tactics that they are using now are totally illegal."
Actually the changes, for the most part, are completely legal right now. As a result, consumers will need to remain vigilant about their statements, and the make sure they read the fine print.
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