According to an Article on Forbes.com, Bank of America and other credit card lenders are putting their customers’ feet to the fire–even those who have always paid on time, even those whose credit ratings have not declined. Forbes attributes this abuse of power to the recent wave of mergers and acquisitions which have concentrated the bulk of industry muscle into the hands of a few huge firms. Many thousands of B of A (MBNA) credit card holders have been informed that their rates will be adjusted sharply upward — as high as 28%.
The bank, bless its cold dark heart, allows its card holders to “opt out” of the increase — by paying off their balances and not using their cards. Amazing that they can get away with this. Imagine if mortgage lenders did that — arbitrarily raising the rates of borrowers several points, then telling them that they can “opt out” by paying their mortgage in full — no problem, let me get my checkbook!
For oft-maligned mortgage lenders this presents an opportunity, a chance to be the good guys. Card holders who no longer want to be subject to the tender mercies of their lenders have an option. Think — if you could get a credit card at a lower rate, a rate than is either fixed and cannot change, even if your credit does take a hit, or a rate that is variable and moves with a legitimate financial index rather than the fortunes of the lender and its desire to wring an extra bit of profit from good customers — wouldn’t you grab it and dump your money-hungry card issuers in a heartbeat?!
Well, mortgage lenders have the equivalent of that credit card, in the form of home equity loans, HELOCs, and cash out refinances. Even no equity mortgages, while not as easy to find or be approved for, carry rates lower than many credit cards. For borrowers with good credit who are being asked to pay 28% or pay off their balances, we lenders can offer them the opportunity to give their card companies the finger and save money too. And we should take it — I know I have a white hat lying around here somewhere……
great article!
Sounds like credit card companies are taking universal default to a whole new level…
Amen Sister!
How about AmeX who punished me for years with those low balance shifting checks until the day I decided to use them. Whoops! That was the rug being pulled out from under me.
They downgraded my credit limit by half, bounced two of the three checks I wrote and basically told me it was my fault because I remodeled a house on my credit cards. I never missed a payment, not one late. There is a place in Hell for these guys. Hopefully, it’s somewhere that they sit and count their money over and over again and can never use a nickel of it.
The power of the banks is frightening. It was the banks who got the bankruptcy laws reformed (to protect themselves, of course). There are also just a few banks. Their power is enormous. And I cannot believe our congress will allow banks to charge 28%. It’s outrageous. It’s usurious. Your article is important, though. It makes me think — I wonder if this move is because they are scared of the credit card bubble.
Funny you should mention this as I just read an article in Time magazine called The Fine Print, sub header; “Credit card charges have consumers steamed and Congress Listening”. Page 57March 3rd issue.
The whole banking segment is under scrutiny now and its causing the banks to take a second look. The threat of more bad publicity with the big guys, may make a posiitve impact on all of us!
Ya with the shakedown happening in the mortgage industry currently, I wouldn’t be surprised to see other banking industries suffer similar fates.
Sounds like credit card companies are taking universal default to a whole new level…