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Card companies are not your friend

They're changing terms for responsible customers

By Karen Datko Sep 27, 2009 1:54PM

Credit card companies are spending lots of money to tell you they're on your side.

 

Peter at Bible Money Matters has noticed the trend: Discover is pushing its cards as "a built-in easy-to-do budget and spending tracker," he said. He also got a mailing from Chase touting savings he could enjoy by using his rewards card, like discounts at Chase's online shopping portal.

 

We get irritated by the commercials claiming the card companies will bend over backward to help if you're having trouble paying your bills. (In all fairness, credit card companies do help some struggling customers with a variety of methods, like a temporary reduction in interest, to get them to keep paying. The companies don't want to write off the debt.)

 

Peter isn't buying all the feel-good stuff. He writes: "The credit card companies are not your friend. They just want your money."

 

Let's review some of the card companies' recent attempts to reduce their risk by assessing more interest and fees or getting rid of customers they no longer want. In the process, these companies, many of them recipients of bailout money, are divesting themselves of any public good will:

(Some of these practices won't be legal when new Federal Reserve credit card rules take effect in July 2010. Why, oh why do we have to wait so long?)

 

Some companies are reducing customers' credit limits without warning -- in some cases to less than their outstanding balance, meaning those customers will also be charged over-limit fees. Ron Haynes at The Wisdom Journal pointed this out in a post called "Dear Ron, we are not your friend. Love, Citibank." Also, their accounts are frozen and the interest rate could skyrocket. 

 

An article at SmartMoney shares more tales of woe about this practice and observes that a drop in your credit limit can damage your credit score.

 

Other tactics we've reported on:

  • Credit card companies are canceling cards that aren't being used. Our partner blogger J.D. Roth at Get Rich Slowly commented that "the irony of this situation is that it only affects people who are using credit cards  responsibly."
  • Bank of America has reportedly penalized customers who asked for lower interest rates by lowering their credit limits or freezing accounts.
  • Credit card companies are raising rates and fees, even on good customers. 
  • American Express was offering some customers $300 if they'd pay off their balances and close their accounts. (In other words, don't let the door hit you in the wallet.)
  • Our partner site ConsumerAffairs.com recently reported that Chase is refunding $4.4 million in credit card fees it imposed without warning on balance-transfer customers -- after a state attorney general got snarly.

Have we left any out?

 

Yes, as some of Peter's readers pointed out, credit cards offer some advantages, like rewards, if you treat them like cash and never carry a balance from month to month.

 

Unfortunately, Peter says, many people don't have self-discipline.

 

Related reading:

Published April 3, 2009

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