Are credit cards the next collapse?

The problem is, though, that the credit card companies are unscrupulous and allowed to get away with it. You're offered a card charging 6% interest. You get it, charge a few things, and always pay your bills on time, but are carrying a $750 balance. You then receive a notification that for unspecified bad credit history, your rate will be raised to 25%. This kind of practice simply cannot be right.

I love my credit card as it allow me to take air travel trips for free and I also pay it in full every month.

I just pick up a car for my mother and used the card to purchase it thereby adding enough points for another free trip to Cancun.

You could get the same thing from loan sharks, but that doesn't mean that their behavior is acceptable. People really need to be protected from the card companies as they exist today. A "credit card holder's bill of rights" recently passed the House, but lobbyists are keeping it from being brought to a vote in the Senate.

Federal regulators passed something today that will go into effect in mid 2010. See below.

http://www.usatoday.com/money/perfi/credit/2008-12-17-credit-card-rules-late_N.htm


Be prepared for the availability of credit to shrink for everyone. I work for one of the 10 largest credit card companies; I know what we're planning.

Good. Credit card companies cannot be permitted to give people low interest credit cards, and then, once they have a balance, unilaterally double or triple the rate. They cannot be permitted to engage in predatory practices with the direct object of tricking naive people and holding them in a kind of slavery for the rest of their lives.

So, what are you all planning, exactly?

We don't have any specific plans yet, but it's pretty obvious that all 0% offers will go away (or be very very short termed, have fees attached, or be limited to the very best customers). Card perks will decline or be harder to use. Interest rates for everyone will go up at least 2-4%. Credit limits will go down for new and existing customers. And credit for lower FICO scores (660 and below) will be harder to obtain.

I believe this will cause a slowdown in our economy as spending will have to decrease.

I would also expect a lot of effort to make bankruptcies even tougher.

You do know that people can decline the increase in their rates right. If they don't want their rates to go up they can cancel their card and pay off the balance under their current terms.

I do, but they may not, and what possible moral justification is there for taking someone with an 8% rate, and telling him that his new rate is 25% because he missed one payment? Don't you dare try to justify this **** morally.

They get a letter that tells them that they have 30 days to cancel their card or their rate will go up. If they didn't know it before they were late, they knew it after they received the legally required letter.

Whatever crumping happens will obliterate me. So it goes. Oh, wait, not immediately. Whatever.

....so, has anyone seen this happen on their cards?

I rejected a B of A interest rate increase end of last year. It was not a default increase, btw, just arbitrary. I successfully fought off a default increase from Capital One -- they like to jerk around your due date to see if they can catch you napping. I use automated bill pay and they got me, but I threatened to close and do a balance transfer and all became right with the world again. Of course, that was before the latest round of rate increases and credit line slashing. Amex slashed my credit limit on a card that I don't use anyway, no big deal. But yeah, you can feel the tightening. And you get the sense that they are doing it to people who they are pretty sure will just keep on paying. I wonder if there will be some blowback, though. I mean, if I lost my job and had a balance on my card, and they rate-jacked me, you can bet your ass that would be the last bill I would pay.

I don't think you can reject a default increase like that, though. You're talking about the new "change in terms" rate increases that you can reject. (B of A gave me only 14 days, btw.) A default increase is already in the contract, so you are more or less at their mercy. I am in complete agreement with Brandon on this one.