More evil from banks reg. credit cards

[Miramonti]

(This is posted here and not P&N because of how many cc threads and interest in them there is.)

Wachovia and Bank of America are raising their minimum due amounts from 2% to 4%. Probably look for others to follow suit, you know how that goes.

Imo this is to create more 'default of terms', because as they've learned the past few years, defaulting is much more profitable than when people do not default on any of their terms (ie tlate fees and then raising interest rate to near 20% or above.)

Suddenly doubling the amount due can create major problems for a lot of people. :disgust:

Story

 

[Legendary]

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

:roll:

 

[Armitage]

Well sure, they're about to get the bankruptcy bill they've been lobbying for, so now they can start tightening the screws.
Don't get me wrong - I'm all for personal responsibility, but a tightening of the credit market should accompany this bankruptcy bill.

 

[dionx]

increasing the minimum in the short term would cause more people to default, but in the long run, it would help people get out of debt (in theory). most people in debt spend their available credit as soon as they make a payment

 

[Miramonti]

Originally posted by: Legendary

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

:roll:

Unless someone is on a balance transfer special, $9k of debt would be more like atleast $350-400 minimum payment (not $180), thus doubling to $700-$800 a month! That's huge.

/EDIT: my bad, its still a minimum of $180.

 

[theGlove]

Originally posted by: jjsole
(This is posted here and not P&N because of how many cc threads and interest in them there is.)

Wachovia and Bank of America are raising their minimum due amounts from 2% to 4%. Probably look for others to follow suit, you know how that goes.

Imo this is to create more 'default of terms', because as they've learned the past few years, defaulting is much more profitable than when people do not default on any of their terms (ie tlate fees and then raising interest rate to near 20% or above.)

Suddenly doubling the amount due can create major problems for a lot of people. :disgust:

Story

you actually have a bank of america visa card? there are better ones out there btw

 

[Miramonti]

Originally posted by: dionx
increasing the minimum in the short term would cause more people to default, but in the long run, it would help people get out of debt (in theory). most people in debt spend their available credit as soon as they make a payment

I think that's a great point and agree, it might eventually be good down the road. However given the profit motives, I suspect that if people aren't taking on enough debt as a result, the banks will in turn reduce the minimum payments again to entice more debt again. /cynical

 

[Miramonti]

Originally posted by: theGlove

Originally posted by: jjsole
(This is posted here and not P&N because of how many cc threads and interest in them there is.)

Wachovia and Bank of America are raising their minimum due amounts from 2% to 4%. Probably look for others to follow suit, you know how that goes.

Imo this is to create more 'default of terms', because as they've learned the past few years, defaulting is much more profitable than when people do not default on any of their terms (ie tlate fees and then raising interest rate to near 20% or above.)

Suddenly doubling the amount due can create major problems for a lot of people. :disgust:

Story

you actually have a bank of america visa card? there are better ones out there btw

No, I don't have either of these.

 

[myusername]

Originally posted by: dionx
increasing the minimum in the short term would cause more people to default, but in the long run, it would help people get out of debt (in theory).

Isn't that what blockbuster claimed when they moved to the oh-so-popular due-by-noon policy?

 

[Miramonti]

This is a minimum payment of almost 50% of the balance per year.

 

[rufruf44]

Originally posted by: jjsole

Originally posted by: Legendary

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

:roll:

Unless someone is on a balance transfer special, $9k of debt would be more like atleast $350-400 minimum payment (not $180), thus doubling to $700-$800 a month! That's huge.

The minimum payment is based on percentage of the current balance (after interest calculation). A $9,000 debt will mean $180 minimum payment per month . Not $350-$400, regardless of the interest rate.

 

[kranky]

I don't want anyone to get in serious financial trouble over this, but I do hope people learn that credit card debt isn't good. With a mortgage or car loan you at least know that the terms aren't going to change while the loan is outstanding. Not so with CCs.

Realistically, anyone who can't handle a 4% minimum payment is long past being in over his head anyway unless it's a short-term emergency. It wasn't very long ago that 3% was the minimum, so 4% isn't exactly bending people over. If people stopped to realize that paying the minimum 2% meant they would be paying that same balance for decades, they might pay a little more.

The minimum payment on a $9,000 balance would change from $180 to $360 regardless of interest rate.

 

[Aharami]

im for this. maybe this will teach people to live within their means

 

[Miramonti]

Originally posted by: rufruf44

Originally posted by: jjsole

Originally posted by: Legendary

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

:roll:

Unless someone is on a balance transfer special, $9k of debt would be more like atleast $350-400 minimum payment (not $180), thus doubling to $700-$800 a month! That's huge.

The minimum payment is based on percentage of the current balance (after interest calculation). A $9,000 debt will mean $180 minimum payment per month . Not $350-$400, regardless of the interest rate.

Thx for the clarification. People's amount due can be more due to their terms (and usually will be), but this raises the absolute minimum.

 

[PingSpike]

I have to agree with kranky on this one. The population at large has been pretty stupid with money...and unfortunately we're all going to pay for it.

But honestly, I'd probably get a personal loan for any amount over $2000 anyway so this isn't going to effect me. It sucks if you got into a tight spot though.

 

[KB]

Its hard to see this as evil. The CC didn't make people spend the money. The key is for people to learn not to get the debt in the first place. Debt holders can do whatever they want to the debt if the debtee has signed such a contract. Owning a credit card is signing a contract to accept whatever the company does. It is different if the credit card company blatently lies about rates.

I own one credit card and leave it at a 0 balance.

 

[Miramonti]

Originally posted by: PingSpike
I have to agree with kranky on this one. The population at large has been pretty stupid with money...and unfortunately we're all going to pay for it.

But honestly, I'd probably get a personal loan for any amount over $2000 anyway so this isn't going to effect me. It sucks if you got into a tight spot though.

If they weren't so predatory lately I would probably agree as well, but people can really get in a bind when they think they are getting a 4% balance transfer, not realizing how tightly the terms are structured to promote a default of terms so they can jack up the rate significantly, as well as terms being modified against them as the debt is carried.

Its always disgusting to see banks make it any harder than they already do for people. Personal responsibility is critical, but when people make small mistakes or are mislead by aggressive and deceptive marketing tactics, the price they pay is too often very unjust.

 

[VirtualLarry]

Originally posted by: jjsole
Wachovia and Bank of America are raising their minimum due amounts from 2% to 4%. Probably look for others to follow suit, you know how that goes.
Imo this is to create more 'default of terms', because as they've learned the past few years, defaulting is much more profitable than when people do not default on any of their terms (ie tlate fees and then raising interest rate to near 20% or above.)

No doubt. In the state of MA, interest rates of 20% and up are considered illegal "usury", so what do CC issuers in this state do? They cap the max interest rate at 19.999% instead. And if you have two consecutive "late payments", you are penalized by having your current interest rate bump to the "max interest rate", for a period of no less than six to twelve months.

How do they get away with that? The scary thing is, nearly every card does that, so good luck finding alternatives.

Originally posted by: jjsole
Suddenly doubling the amount due can create major problems for a lot of people. :disgust:
Story

Financial services companies "raping" their customers? Is this a new thing?

 

[Armitage]

Originally posted by: VirtualLarry

Originally posted by: jjsole
Wachovia and Bank of America are raising their minimum due amounts from 2% to 4%. Probably look for others to follow suit, you know how that goes.
Imo this is to create more 'default of terms', because as they've learned the past few years, defaulting is much more profitable than when people do not default on any of their terms (ie tlate fees and then raising interest rate to near 20% or above.)

No doubt. In the state of MA, interest rates of 20% and up are considered illegal "usury", so what do CC issuers in this state do? They cap the max interest rate at 19.999% instead. And if you have two consecutive "late payments", you are penalized by having your current interest rate bump to the "max interest rate", for a period of no less than six to twelve months.

My CC terms aren't that bad, but regardless, I have a monthly automatic bill payment that goes out to my CC for an amount > my minimum payment should ever be & two days early. So when I pay my bill, I just subtract that amount, but I'm covered if I ever forget to make the payment on time. No late fees for me.

How do they get away with that? The scary thing is, nearly every card does that, so good luck finding alternatives.

Originally posted by: jjsole
Suddenly doubling the amount due can create major problems for a lot of people. :disgust:
Story

Financial services companies "raping" their customers? Is this a new thing?

 

[cKGunslinger]

When they change terms, don't they send you a notice and offer you the opportunity to cancel the account and pay off the balance with the original loan terms? I know I've done that with 2 credit cards that tried to implement an enormous late-fee and up the APR on me. I just said "No thanks" and canceled the accounts.

 

[StageLeft]

If signing up for a new card, read the fine print. If you're in such a mess that going from 2% to 4% a month is screwing you, you suck. Period. You suck and this is not the credit card's fault, but yours. They state when you get their card that they can change terms, so if you're unable to bail on their card _at any time_, then you have already taken enough of their rope that you're hanging yourself, and this is what happens.

She said the change from 2 percent of the balance to 4 percent of the balance would translate into the monthly amount due for a client with $9,000 in debt going from $180 a month to $360.

Oh, heaven forbid anybody actually pays their debt down!

im for this. maybe this will teach people to live within their means

No, it will take a lot more than this to teach people that

If they weren't so predatory lately I would probably agree as well, but people can really get in a bind when they think they are getting a 4% balance transfer, not realizing how tightly the terms are structured to promote a default of terms so they can jack up the rate significantly, as well as terms being modified against them as the debt is carried.

It's really not brain surgery. The terms are pretty simple and spelled out in a couple of paragraphs worth of bullet points.

When they change terms, don't they send you a notice and offer you the opportunity to cancel the account and pay off the balance with the original loan terms? I know I've done that with 2 credit cards that tried to implement an enormous late-fee and up the APR on me. I just said "No thanks" and canceled the accounts.

Of course anybody can pay off and cancel any CC at any time. This is only a problem for people who've worked themselves into a tizzy and can't pay the card off, or even close, and worse yet have no real plans to ever pay it off (hence the minimum they were paying).

 

[kranky]

I wouldn't be surprised if this is related to the recent move towards raising APRs if the borrower gets a black mark on his credit record from anywhere - even when the CC has always been paid on time.

Give people a low APR, let them charge up a storm, and at the first sign of trouble jack up the APR. Since they have some blemish on their credit record, it's going to be hard for the borrower to change to a different bank and they could be stuck paying the high APR.

 

[RaiderJ]

If you have $9k in CC debt and AREN'T making at least a 4% payment per month, you have a lot more things to worry about than a couple of hundred bucks. I've always thought that minimum CC payments were miniscule anyway.