Pay your credit card bill on time? Think that was a good way to insure not only a good credit rating but also lower interest rates? Well, no more.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.
This is already happening. Recently the bank holding our one credit card informed us they were raising our interest rate from a 9.9% fixed rate to a 17% variable rate (or thereabouts, the call to customer service was iffy on details at best) that can be raised again and again with 45 days notice. This despite the fact that we have made every single payment on time and have excellent credit.
Now, before some of you say you never use credit (it’s amazing how many people say this, yet everyone in the USA seems to be in debt) we don’t over use it. However, we have run up too much debt recently with some big unexpected purchases and we are doing our best to pay it down. Which is going to be twice has hard if we start paying double the interest.
What to do? Well, we took advantage of a low-cost switch to a no interest card for 12 months (introductory rate) and we will pay our debt off by the end of that period. And after that we will stick with that card since even its regular higher rate is lower than the one we have now.
Now ask yourself, does this whole scenario sound familiar? Sure it does. Just a few months ago banks screwed good home owners who paid their mortgages on time so they could bailout bad home owners who didn’t pay their mortgages on time.
Now customers with good credit are going to pay for those with bad.
It’s truly a bizzaro world under Obama, isn’t it?
Fire and brimestone coming down from the sky, rivers and seas boiling, 40 years of darkness, earthquakes, volcanoes, the dead rising from the grave, human sacrifice, DOGS AND CATS LIVING TOGETHER, MASS HYSTERIA!!!!!
And with a paraphrased message to the Republicans.
And if I’m right, and we can stop this whole hopey-changey thing. Lenny, you would have saved the lives of millions of registered voters.