A familiar story to most of us on this Forum; on AOL this evening.
UP UNTIL SEVERAL months ago, 39-year-old Mark Martinez of Moscow, Idaho, was what you'd consider the credit-card industry's ideal customer. His payments were always on time. He never went over his credit limits. He even carried a balance on one of his cards, which meant he was bringing the bank a profit, to boot.
Then much to his shock, Martinez discovered in February that his card issuer had jacked up his interest rate to a whopping 29.99%. The reason: His $8,000 balance was dangerously close to the card's $8,800 limit. "It was really oddball," says Martinez, whose 790 credit score was high enough to get him any credit he applied for, at the lowest rates available.
Despite his pristine history, Martinez had encountered the latest scourge of the credit-card world: the so-called "default" rate, or punitive charges that credit-card companies can impose on customers suddenly deemed a higher credit risk. Default rates are typically triggered by things like a late payment or going over the credit limit. But they could also be the result of something as seemingly insignificant as running up a higher balance.
In fact, because of a practice called "universal default," credit-card issuers are actually allowed to hike their rates for pretty much anything, according to consumer-watchdog group Consumer Action. In its 2005 Credit Card survey, Consumer Action found that 90% of card issuers would use a universal default rate hike if a customer's credit score decreases, 86% would do so if they paid a mortgage or any other loan late. Nearly half (43%) would hit you with universal default if they decide you have too much debt, while 33% would do it for the exact opposite reason: too much credit available. You can see a rate hike even if all you do is get a new credit card (33%) or shop around for a car loan or mortgage (24%).
The entire article is at the link above; too late for us BKers, but maybe will wake up some other consumers before they get in over their heads. Congress is in the banker's pockets, so abuses are likely to get little "official" notice until a big chunk of the baby boomers looking to retire are going bankrupt, just like I am. My generation took Washington on in the late '60's and early '70's, I wonder if we could do it again...
UP UNTIL SEVERAL months ago, 39-year-old Mark Martinez of Moscow, Idaho, was what you'd consider the credit-card industry's ideal customer. His payments were always on time. He never went over his credit limits. He even carried a balance on one of his cards, which meant he was bringing the bank a profit, to boot.
Then much to his shock, Martinez discovered in February that his card issuer had jacked up his interest rate to a whopping 29.99%. The reason: His $8,000 balance was dangerously close to the card's $8,800 limit. "It was really oddball," says Martinez, whose 790 credit score was high enough to get him any credit he applied for, at the lowest rates available.
Despite his pristine history, Martinez had encountered the latest scourge of the credit-card world: the so-called "default" rate, or punitive charges that credit-card companies can impose on customers suddenly deemed a higher credit risk. Default rates are typically triggered by things like a late payment or going over the credit limit. But they could also be the result of something as seemingly insignificant as running up a higher balance.
In fact, because of a practice called "universal default," credit-card issuers are actually allowed to hike their rates for pretty much anything, according to consumer-watchdog group Consumer Action. In its 2005 Credit Card survey, Consumer Action found that 90% of card issuers would use a universal default rate hike if a customer's credit score decreases, 86% would do so if they paid a mortgage or any other loan late. Nearly half (43%) would hit you with universal default if they decide you have too much debt, while 33% would do it for the exact opposite reason: too much credit available. You can see a rate hike even if all you do is get a new credit card (33%) or shop around for a car loan or mortgage (24%).
The entire article is at the link above; too late for us BKers, but maybe will wake up some other consumers before they get in over their heads. Congress is in the banker's pockets, so abuses are likely to get little "official" notice until a big chunk of the baby boomers looking to retire are going bankrupt, just like I am. My generation took Washington on in the late '60's and early '70's, I wonder if we could do it again...
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