cc pushing account holders into default

[IOIOIO]

I'm sure this is an old story probably posted on these forums somewhere, but I'm so outraged that it just happened to me.

Even though this is going to change soon, I'm still up to date on all my credit card payments. Even so, Chase upped my rate from 17.74% to 29.99% for no particular reason. That raises my monthly minimum a *lot*. I called them and verified that this wasn't some sort of penalty rate for any kind of mistake I made on the account. They said the rate was changed only because of what a credit bureau reported to them as my outstanding debt ratio. So even if you manage to kill yourself paying them, they turn the screws tighter for no good reason other than that they have already turned the screws tight.

If not everyone responds to this kind of thing by filing bk, they must know that they are forcing people into earlier defaults on their accounts. Do they have a reason for that? Or is their plan to get a few more dollars ahead of the other creditors because they've calculated that you're inevitably going to default? I just don't understand their business strategy here.

[annikasaunt]

That was one of my main reasons for filing. Killed myself trying to pay everybody, missed one payment on one and they all raised my interest rates to almost 30%!! There was no way to catch up after that. They don't realize that they are killing themselves. My debt is gone now and worth every penny spent to get there and every year it will stay on my credit report. I can actually breathe much easier these days.

[IOIOIO]

...missed one payment on one and they all raised my interest rates to almost 30%!! There was no way to catch up after that.

I can at least understand when they catch you violating one of the rules they set up to generate more fees. In fact, I've missed payments every now and then in the past due to statements not received, but even though I don't have the right to count on receiving the statement in the mail to remind me to pay, they'd reverse the fees if I didn't have any other lates within the previous six months, which I always didn't. But today's B.S. was due strictly to their discovering my increasing inability to pay, even though the account has been in good standing for 13 years. I called them to have this unjust increase to 29.99%, but no dice with the "supervisor" they connected me to. I could tell she was highly trained at managing this type of phone call and was not one of those robots you get when you call in who read you scripts and prepared statements.

I'm just wondering what their business strategy is here. The only story that fits the facts is that they've pretty much written you off at this point and are just trying to get as much out of you as possible so that they get more of your last gasps than their competitors. In my case, it will indeed work that way.

[down @ out]

business strategy

I believe their business strategy is simply greed.

I filed a bankruptcy last year before the law changed and a large part of my debts were credit card debts. Medical prolbems. Anyway when it became clear that the companies would be raising their minimum payment requirements I filed pronto. The handwriting was on the wall and I could see it all coming. The higher minimums would eventually catch me and then everyone would double the interest rates and I would go down.

Didn`t won`t that to happen under the new law. Interestingly enough I now have 3 credit cards, not as good as the ones I had, but with time that will change.


Down & Out

[IOIOIO]

I understand that greed (the bottom line) is their only principle, but I just don't see how forcing you more quickly into default by jacking up an account in good standing to 30% adds to their bottom line in the long run. Wouldn't they want to keep you on minimum life support and paying rather than push you over the edge?

[CATCHMEIFYOUCAN]

creditors

dont creditors have to drop the finance charges and the interests once one files for BK ???

[IOIOIO]

dont creditors have to drop the finance charges and the interests once one files for BK ???

But why push you into default and bk by jacking up the rates on accounts in good standing?

[lrprn]

But why push you into default and bk by jacking up the rates on accounts in good standing?

Frankly because although increasing the APRs on cards does push some people to or over the financial edge, typically most debtors work hard to pay the increased payments rather than declare bk. The rake-off for cc companies more than makes up for the pittance they lose from the small % of us who file bk.

If the cc companies weren't making a good profit off this "jack the APRs skyward" scheme, they wouldn't be doing it.

[IOIOIO]

typically most debtors work hard to pay the increased payments rather than declare bk. The rake-off for cc companies more than makes up for the pittance they lose from the small % of us who file bk.

If the cc companies weren't making a good profit off this "jack the APRs skyward" scheme, they wouldn't be doing it.

That makes sense, but what if they know ahead of time that you'll make fewer of the increased payments before they know you'll fall off the edge?

Of course we have to assume that whatever policies they choose to follow, it's simply because it adds to their profit. But in that case, why not jack the APR's on all people with high balances that they believe won't pay the full balance in lieu of accepting the higher rate? Their captive audience is bigger than the group of people who credit bureaus report are close to the edge. Pushing people who are already close to the edge closer to the edge seems like it could work against their bottom line because of their risk of creating defaults, even if they can count on it being a lot less likely for the overextended customer to declare BK.

I'm just wondering--and I suppose we can never know without seeing the numbers--if their policies are so perverse as to intentionally create defaults (or bring them on earlier) because that rakes in a few extra dollars for them ahead of their competitors. It might be that they're so clever (they have all the statistics and actuaries) that they write you off long before you write yourself off and then turn to screwing over their competitors to make profit instead of investing in their own business. Sort of like playing old maid: the last one stuck with a non-performing loan is the loser.

[joe_siy]

You people amaze me....

Do you ever bother to read the agreements you sign before submitting credit card applications? Even if they raise them to build profit, they do so within the rules of the agreement you signed.

[BassBoy]

Universal Default

This is known as "Universal Default." Under this provision, the banks reserve the right to check a consumer's credit regularly and make changes to the interest rate if they find something they don't like.

Unfortunately, most consumers don't know what they're getting into when they accept contracts allowing banks to take these steps.

Anyone reading through the extremely fine detail of these credit card agreements is sure to miss the sections that spell out that the rate of interest on their credit cards will be impacted by late payments to other entities. Most consumers don't know this practice exists.

In plain English, if a consumer is late in paying to any creditor , takes on too much debt, or even, in some cases, pays only the minimum due balance on the card, the credit card company jacks the interest rate up as much as 20 points, with rates in the 30 percent range not uncommon. This happens even to consumers who have never been late or gone over the credit limit with the credit card company making the increase.

Not only that, consumers who want to protest the rate change may find themselves shut out of the legal process. Most credit card service agreements include an arbitration clause under which consumers agree not to file a lawsuit or join in a class-action suit against the bank.

Instead, consumers must meet with an arbitrator of the bank's choosing when resolving disputes.

[IOIOIO]

the banks reserve the right to check a consumer's credit regularly and make changes to the interest rate if they find something they don't like.

Unfortunately, most consumers don't know what they're getting into when they accept contracts allowing banks to take these steps.

I understand it's legal and that they're experts with tuning their fine print. I'm just wondering exactly what makes this practice sound business-wise. Are they maximizing the amount they extract out of you, or are they merely ensuring that their portion is the largest of all the portions all your creditors extract out of you, even if that means less for them in the long run. In other words, everybody loses. Check out the results when you google the phrase "short termism".

[anonymuse]

Do you ever bother to read the agreements you sign before submitting credit card applications? Even if they raise them to build profit, they do so within the rules of the agreement you signed.

Most people on the boards feel responsible, but the credit card industry needs to step up and share responsibility for their predatory lending techniques. If people didn't feel responsible, they wouldn't be waiting til they've lost everything to file. People wipe out life savings, stock, bonds, and 401Ks to stay afloat preventing the inevitable. I'd rather have a cc company work with me--take lower payments for a period of time and get back down to a reasonable rate to pay them back over a long period of time instead of accruing more and more interest and late fees--than file BK, and you'd think they'd want that too.

Most BKs are caused by a major event--medical bills, divorce, death, job loss, or a combination of the above. Most are below the median income for their state. Very few just say "let's get as many cc's as we can, max them out, and file BK"--that the misperception by the public that fortunately has never had to look into the specifics of the situation.

[kcj]

Do you ever bother to read the agreements you sign before submitting credit card applications? Even if they raise them to build profit, they do so within the rules of the agreement you signed.

There's no place for sympathy on these boards. (deleted by moderator)

Actually there is a lot of room for sympathy on these boards.

From moderator: Don't incite a potential troll--it's best to not respond then keep the anomosity going. Let's just do our best to keep a positive tone on the boards while people are going through one of the most stressful times in their lives.

[jane taylor]

Another day, another troll