If you missed this post, here's another chance to learn a valuable lesson the EASY way - by simply reading about it. No one wants to open their mail and find out their interest rate went up 15-20% overnight.
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Read ALL the mail you get from your credit card issuer's and here's why.
With rising defaults on credit card debt, banks and retailers are trying to keep up profits by raising interest rates on their faithful credit card holders that are making their monthly payments on time.
They do this by sending their credit card holder a letter in the mail that is pretty innocuous looking, but read it because it is going to greatly impact your finances.
My son, who has never been late on a payment has received two this week, one from HSBC and one from Citibank. Both stated in itty bitty writing that unless he sends them a letter stating he opts out, the bank or retailer will raise his interest rate to over 20%. In order to avoid this more than doubling of his interest rate, he has to write a letter, send it by a date less than two weeks away and state that he disagrees with this interest rate increase and that the bank or retailer must close his account and he will continue to pay his card at the previously agreed upon rate.
I received one of these innocent looking letters back in June (so the bank told me). If I got it, I didn't read it. Learn from my mistake and READ YOUR MAIL. I had never been late on my credit card payment once since I have had the card (about two years) and always paid above the minimum amount due, however, Advanta ran a credit profile on all their customers and any that fit a certain profile received this letter (or maybe everyone, I'm not sure).
Advanta raised my interest rate from 8.99% to 23%. Of course I called them flabbergasted and asked what the heck and they said, "We sent you a letter. You had the opportunity to opt-out." Well what do you say to that?
I previously had my finances under control but that really changed things quickly.
It would change things quickly for my son as well if the bank that financed his motorcycle increased his interest rate from the low two year introductory rate to over 20%, but since I read his mail like any good mom, he's going to opt out and keep his low interest rate. Boo hoo to the bank.
As times get tougher and credit card default rates increase, banks are going to be looking to their steadfast clients to make up those losses. Losses they created, in many instances, by giving credit increases to customers who they did not document had the ability to repay.
In other words, banks are guilty of helping create the mess, but hey, they are getting bailed out, but you aren't, so be smart; don't get caught in this trap. READ YOUR MAIL.
Copyright 2006-12. All rights reserved.
DISCLAIMER: Information contained in this post is deemed reliable on the date of publication, but it is not guaranteed and it is subject to change without notice.
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Margaret Woda, REALTOR and Associate Broker
Direct: (301)346-2923 or click on EMAIL
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Margaret - similar type of thing happened to a friend. but not only did they try to increase the interest, the called before the payment due date and told her she had to make a payment???? She was never late and always pays more than minimum. She told them they will get their payment when it's due! Crazy~Rita
Hi Margaret I got the exact same letter in the mail this week. It is totally ridiculous and these companies are just going to cut their nose off despite their face.
Margaret: Well Go Ahead...Just Make My Day! Now Ray says we might have gotten one of those letters...and it went in the garbage. Let's hope it was something else. I can't take much more.
I read a story locally here about a business owner that as an Advanta card....they raised his rate to .....THIRTY, YES 30% INTEREST!
We've bailed out the financial institutions so they can lock us up and throw away the key! Who, What When and Where is somebody of some authority going to stop this madness???
I guess I'll go to a holiday party and have a couple!
Margaret: I just read the article posted by Fran Gatti - Realtor® Crescent City CA Real Estate, and I was amazed and shocked. I will be letting everyone know of this type of business practice by the credit cards companys.
My recent credit card statement including an increase for unpaid balances of 23%. Fortunately I pay any charges monthly but one slip up and the whammy hits. I think this qualifies nicely in the "preditory" lending practices. How can a company legally change a credit card interest rate from 5% to 23% in one feel swoop?
OMG I've never heard of such a thing! Talk about preditary lending! I get those things in the mail all the time. I don't have a balance because I pay it off every month, but I can't imagine if I didn't! Yikes! Thanks for the heads up .
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Pretty darned frustrating. Thanks for the warning, I will have to look out for it. It is terrible how many changes they can constantly issue after you have singed up, and they should be required to print it in a font as large as an average person of your age group can read, they do have our birth dates! And the junk solicitations should be distinguishable from the real messages in some more obvious manner. Sorry for the rant! It is hard to go cardless but we might get frustrated enough to figure out a way.