Credit Card Companies are Plotting to Overthrow the World!
Not really, but who knows in this day and time. After all, stranger things have happened. What prompted this quaint observation was a little blurb I saw this morning on a national morning news show.
The article was about a local Texan who was astonished and amazed when he received a letter from his credit card company telling him that although he always paid on time and never maxed out his line of credit, they were increasing his interest rate by 400% because he used the card twice in the past month. They did offer a caveat. He could cancel the card and take a cancellation interest rate and lose any reward points he had accumulated.
What intrigued me was something very similar happened to me earlier this year. I later learned that the credit card issuer was the same as mine and I also learned after speaking with friends and family that this is not an isolated occurrence. More and more consumers are being given similar choices.
So what has spurred this anomaly? Could it be that credit card companies are losing money because of defaults? Maybe it is because these companies are no longer making as much investment income. Or, is it simply a case of greed? I will leave that determination to you.
Granted, credit card companies are no different than anyone else. They are in business to make money. But when do they cross the line between making a decent profit and gouging the consumer when they are down? There was a time that if you received a change in service from your credit card company and you didn't like it, you simply switched providers and moved your balance to a better deal.
With today's credit crisis, these companies are acutely aware they have you by the, well, you get my point. I would suggest they reason you aren't going anywhere and will pay whatever it takes to preserve your credit line and your good name, even if it means paying loan shark rates.
As for the Texan, like most Americans he is on a fixed income so any increase in his interest rate means he does without something else like electricity or food. What did he do? He took the credit card company up on it's offer. He cancelled the card and reduced his monthly payment to the minimum required. Yes, he did lose his reward points but he wasn't using them anyway so that doesn't mean much in today's economy. Yes, he did end up with a higher interest rate, but so what. It's still cheaper than what they originally proposed. Yes, the credit card company will most likely report the cancellation to the credit bureau but since no one is lending, that doesn't really affect him either. His only solice is that the credit card company won't bankrupt him on their way out of business!