Bad Credit Card Practices by Credit Card Companies

Rising credit card delinquency rates and strict new government regulation is stifling the profit margins for bank credit cards.  But, don’t think that new regulations will stop credit card companies from earning a buck.  Despite the regulations, credit card issuers will still have room to increase your credit rate and fees.

Even with regulation designed to prevent credit card companies from raising existing credit card holders credit card rates willy nilly, credit card issuers still have the power to manipulate the credit card limit, credit card rate and a whole host of credit card services.  The only way to truly control your credit card terms of use is to use credit card debt wisely and shop and compare credit card offers before accepting a new credit card.
 
As the new set of regulations are digested by the credit card industry and bank credit card companies process the recent rise in late monthly credit card payments, the marketing engines are working hard to generate more profits while the phone banks in the industry are chewing on ears arranging payments. 

To avoid continued struggles with delinquent credit card accounts, credit card companies are making it more difficult to be approved for a new credit card for those applicants who have less than average credit.  The credit card companies are looking to minimize their risk after absorbing a slew of bad loans in recent years.  To reduce their risk, bank credit card issuers will shift their marketing goal from quantity to quality with new credit card approvals.  As a result, those consumers with low credit scores might find it harder to secure a new credit card in the near future.

Part of the marketing efforts of the credit card industry will continue to involve promoting low credit card rates with a kicker.  The kicker is the fine print in most credit card offers that have statements mentioning that if you fail to qualify for the current credit card rate offered, you can be issued another credit card rate.  With this marketing trick, the credit card company can offer a low rate with a range that includes credit card rates for consumers who do not qualify for the low rate.

In addition, while new regulations make it more difficult for credit card companies to raise your rate, they will still have that capability.  Interest rate hikes on existing credit card balances would be allowed under limited conditions, such as when an introductory rate ends, if it is an adjustable rate credit card or if the cardholder makes a late credit card payment.  The credit card companies can no longer retroactively change the rate on an existing credit card balance.

Furthermore, the credit card account holder must be over 60 days late on payments before their credit card rate can be raised on existing balances.  The credit card companies must now give 45 days’ notice before increasing your annual percentage rate or changing any significant terms of the credit agreement, 15 days is the current standard.

Customer service will certainly continue down the path of gross incompetence.  For instance many credit card companies have been cutting credit card limits for existing credit card customers to limit exposure to losses from defaults.  When the customer uses the credit card again and surpassing the new, lower credit card limit is easy.  Now that credit card customer is whacked with an over the limit credit card fee. 

To top this off, a recent example of poor policies and treatment at credit card customer service centers came from one of our readers.  After going over the credit card limit with a Chase credit card the customer made a call to Chase to see about having the over limit fee waived.  The customer made the credit card payment online and was notified that the request to waive the fee had to be made in writing.  Customer service?  Credit card companies have established their customer service centers not to assist customers, but to create a structure to avoid assistance and collect fees and payments.

Credit card companies will continue to change their marketing strategy to work around the rules and regulations to squeeze the consumer because of their financial mistakes.  Expect credit card companies to keep managing their credit risk at the customers expense, raise rates and reduces exposure by reducing credit card limits when they can.

Consumers should keep a close watch on their individual accounts.  Monitor your credit score, shop and compare credit card offers and be vigilant about your debt and family budget.  If you feel you have been mistreated by your credit card company, send us a note.  The squeaky wheel gets the oil.  Squeak.  Scream if you have to.  If Chase wants a customer to request the  waiver of an over the limit fee in writing, it is our responsibility to advise customers to steer clear of that bank and their products.  Added note – that customer has been a Chase credit card customer for over 7 years and has had some late payments but makes the payments and uses the credit card.  The credit card rate is over 25%.  Read that again – over 25% and has to write a letter to waive his $39.00 over the limit fee after making the credit card payment.  It’s a free market, just don’t perpetuate this kind of horrific service by doing business with that bank.

Tags: bank credit card, credit, credit card, credit card account, credit card balance, credit card company, credit card delinquency, credit card fee, credit card limit, credit card offers, credit card payment, credit card rate, credit card services, credit scores, new credit card

This entry was posted on Tuesday, August 11th, 2009 at 4:24 pm and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.