Credit Card Lenders Go on a Rampage

[hguyw]

Liz Pulliam Weston's latest: Credit card lenders go on a rampage

Personally, I haven't experienced anything she mentions. I only have two cards, an AmEX and Cap One. Opened the AmEx card to do a balance transfer from the Cap One back in the summer of 2007. Paid it all off in Oct of 2007. The Cap One had been at 9.9% and after I paid it off, went to 15-something. I haven't carried a balance since but just checked the rate on the Cap One, it's down to 10.9% on purchases (17+ on cash). They haven't messed with my due date either, it's still the 21st - 23rd of the month, just like it's always been.

Just wondered if anyone here has been a victim of the 'rampage'?

 

[73ss454]

I just received a letter from my Master Card that states they are canceling my card because of non use. OK with me, I only use a debit Visa now anyway. If it affects my credit I really don't care, if I can't pay cash for something I don't want it anyway.

Ran my credit score last week via the 3 largest credit agencies, 825,825 and an 800, good enough.

 

[DangerMouse]

No rampaging in our household. However, when we get around to it, we are planning to cancel 3 of the 6 credit cards we do have. Nothing to do with interest rates or payment cycles, just that we don't need that amount of credit and don't do enough shopping to spread the love around and keep all the reward programs attached to these cards functioning at a healthy level.

I'm not bothered by the moving of due dates either, as I have all my cards set up for auto pay so that covers that base.

 

[JOHNNIE36]

I learned the hard way about cancelling credit cards. It can adversely affect your credit rating. Best thing to do is to try to get the credit limit raised on each card and then use them all periodically. Charge something, pay it off and then wait three to four months and use it again. Cancelling cards can do more to hurt your credit score then to just keep them around.

 

[yakers]

It is true that canceling credit cards can temporarily effect ones credit rating but unless something is specifically contemplated in the near term then do it anyway. The scores will recover with time and you can raise the credit limit on the cards you do keep. It seems like too much effort to manage too many of them. DW & I went on a hunt and closed everything we could, a lot of store cards but she would not give up her Nordstroms card. I do have two cards which I use and are payed automatically. But I am at a stage that I don't need credit. House paid off. Last time I checked my credit rating was 837, probably lower now from lack of use and closing cards but I could not care less.

 

[scrabbler1]

I pay my credit card balance in full each month. That is, in the few months each year I actually USE my credit card. Furthermore, a branch of the bank I have that card is located within walking distance from where I live, so I simply pay it in person (or use its deposit machine within the building). This prevents any of the shenanigans about delaying the processing of a payment to charge a late fee. And the card won't get canceled for nonuse. [My debit card acts as a backup but I use that only once a year that way. It is an ATM card like it was 20 years ago.]

Therefore, I do not care what the interest rate is. As long as they do not charge an an annual fee or remove the grace period (i.e. no interest on new purchases if there is a zero balance) and keep a few weeks between the billing ending date and the date due, it makes no difference to me.

I had two other credit cards which were canceled by the bank because of many years of nonuse. I was relieved because I could now shred and throw out all the important stuff they had been sending me over the years.

I know......I go against the grain when it comes to credit cards. My bank must hate me because they can't make any money off me LOL!

 

[Ed_The_Gypsy]

scrabbler,

we do the same.

I also have two kinds of credit in Canada, which operates by different rules. We have options most do not have.

 

[kyounge1956]

How important is it to maintain a good credit rating, if one has no debt? Can it affect ability to get (e.g.) a reverse mortgage if one has made no use of credit for a few of decades before applying? Higher insurance rates or anything like that? The "rampage" doesn't affect me, since I have no credit cards, but it makes me wonder if I will really be able to thumb my nose at the ratings agencies when I retire and eliminate my last remaining debt.

 

[traineeinvestor]

Question: if you do cancel a credit card, how long before the effect on your credit rating goes away? The reason for asking is that my previous employer provided a credit card issued in my name for me to use for business purposes which was (as expected) cancelled when I resigned.

How important is it to maintain a good credit rating, if one has no debt?

No idea, but I have no way of knowing for certain what my future credit needs will be. If I can preserve/enhance my credit rating at no cost and without undue exertion I would do it even if I do not anticpiate needing the credit.

I pay my cards in full each month by autopay. The issuers can make the interest rates as high as they like as far as I am concerned - so long as I can pay before interest starts accruing. If they start charging me fees, I will cancel one of my three cards but keep two.

 

[hguyw]

How important is it to maintain a good credit rating, if one has no debt? Can it affect ability to get (e.g.) a reverse mortgage if one has made no use of credit for a few of decades before applying? Higher insurance rates or anything like that?

I asked the gal in my insurance office (State Farm) about this and she confirmed that your credit score can affect your car and homeowner's insurance rates. It's one of the factors they look at (not the only one), figuring if you're irresponsible with money you're more likely to behave irresponsibly in other areas of your life. So, I run some expenses - car repairs, vet bills, dental bills, etc. - through the CC, just to use it once in awhile, and then pay in full.

Dave Ramsey tells listeners to cancel their CCs once they're paid off. (Says it with something like, "If you play with snakes, you're gonna get bit.") He likes to brag that his credit score is zero because he has had no debt for many years. IIRC he refers to it as a "debt score" instead. He's a multi-millionaire, so I figure he can afford higher insurance rates. If I want to ER, I can't.

 

[Walt34]

Like scrabbler, I simply don't care, and for the same reasons. DW just closed a cc account she'd had for 20+ years because first they lowered the credit limit, which was not really a big deal because she's never come close to approaching it, then they were going to impose a $15/year fee for it. So she simply took her business elsewhere.

Perhaps we're naive but neither she nor I comprehends the teeth-gnashing over all this. Since when was a loan, wherever and whenever you want (which is what cc's are all about) some God-given constitutional right?

There is some debate here about Suze Orman's advice, but I think she has one sentence right: "If you can't pay cash you can't afford it!"

 

[FinanceDude]

The CC companies are trying to get all their shots in before the laws change and they can't screw folks as much anymore.

I have had all my credit cards interest rates raised because of lack of use. I think the CC companies WANT me to close my cards. I have NO IDEA HOW they think that RAISING my interest rate is going to get me to USE my cards??

 

[FinanceDude]

How important is it to maintain a good credit rating, if one has no debt? Can it affect ability to get (e.g.) a reverse mortgage if one has made no use of credit for a few of decades before applying? Higher insurance rates or anything like that? The "rampage" doesn't affect me, since I have no credit cards, but it makes me wonder if I will really be able to thumb my nose at the ratings agencies when I retire and eliminate my last remaining debt.

Dave Ramsey often comments that his FICO score is ZERO, because he hasn't used any credit for 20 years or more, and he doesn't care. Well, not all folks are multi-millionaires like Ramsey and Clark Howard........

 

[tuixiu]

We each carry one so that they both stay active and if one is stolen/broken/compromised we're not stuck if traveling etc.

 

[Caoineag]

All of my cards have raised interest rates and I even had one call to try and get me to opt in to spending over my limit. She kept trying the argument but what if you need a tank of gas and you don't have room on your card. All I could think is that if I am at the point where I have maxed out all of my cards and have no cash, there ain't no way I am going to be able to pay anyone back so you really don't want me going over my limit anyway (didn't say that of course, just said no thank you about 5 times).

 

[W2R]

Like scrabbler, I simply don't care, and for the same reasons. DW just closed a cc account she'd had for 20+ years because first they lowered the credit limit, which was not really a big deal because she's never come close to approaching it, then they were going to impose a $15/year fee for it. So she simply took her business elsewhere.

Perhaps we're naive but neither she nor I comprehends the teeth-gnashing over all this. Since when was a loan, wherever and whenever you want (which is what cc's are all about) some God-given constitutional right?

There is some debate here about Suze Orman's advice, but I think she has one sentence right: "If you can't pay cash you can't afford it!"

I don't understand it either! So what if you don't like their interest rate or way of doing business? This is called "supply and demand", folks. Credit card companies are going to continue to treat their customers in abysmal fashion if there is still demand for their particular credit card. If you can live without that card then just close it and move on like Walt's wife did.

I think the Suze Orman show is entertaining, and even though I don't agree with all of her advice much of it is well founded.

 

[calmloki]

My BofA Alaska Air card showed an APR of 45.83% on the latest bill. This on a $83.71 bill. I managed to look at the wrong number when paying last time and carried a tiny balance. Turns out they have a "minimum finance charge" of a buck fidy and that worked out to 45.83%. I went on my own little ineffectual rampage - I am getting a $99 companion ticket with this card and they just charged me $75 for membership, so that's cheap air fare, but I don't need the extra blood pressure spike - think I'll make do with my PenFed and Costco Amex cards and dump this one. Can't imagine seeing crazy interest like that every month!

OTOH, our BofA stock needs to double to get us out of the red side, so maybe we should be happy. Nah. Ticks me off when a card company charges way way more than we can get making hard money loans.

 

[W2R]

My BofA Alaska Air card showed an APR of 45.83% on the latest bill. This on a $83.71 bill. I managed to look at the wrong number when paying last time and carried a tiny balance. Turns out they have a "minimum finance charge" of a buck fidy and that worked out to 45.83%. I went on my own little ineffectual rampage - I am getting a $99 companion ticket with this card and they just charged me $75 for membership, so that's cheap air fare, but I don't need the extra blood pressure spike - think I'll make do with my PenFed and Costco Amex cards and dump this one. Can't imagine seeing crazy interest like that every month!

Good for you!! You don't need it, you don't want it, and nothing tells them this more clearly than dumping that card.

 

[kyounge1956]

I asked the gal in my insurance office (State Farm) about this and she confirmed that your credit score can affect your car and homeowner's insurance rates. It's one of the factors they look at (not the only one), figuring if you're irresponsible with money you're more likely to behave irresponsibly in other areas of your life. So, I run some expenses - car repairs, vet bills, dental bills, etc. - through the CC, just to use it once in awhile, and then pay in full.

I will never understand the thinking of credit rating agencies, if they take the fact that my only debt is my mortgage as evidence of financial irresponsibility on my part.

Dave Ramsey tells listeners to cancel their CCs once they're paid off. (Says it with something like, "If you play with snakes, you're gonna get bit.") He likes to brag that his credit score is zero because he has had no debt for many years. IIRC he refers to it as a "debt score" instead. He's a multi-millionaire, so I figure he can afford higher insurance rates. If I want to ER, I can't.

I paid mine off years ago, before I ever heard of Dave Ramsey. Did your contact at State Farm give you any idea of how big a price differential there is on car/auto insurance between credit rating based on one debt and credit rating based on no debts?

 

[youbet]

I will never understand the thinking of credit rating agencies, if they take the fact that my only debt is my mortgage as evidence of financial irresponsibility on my part.

Actually you're misunderstanding how credit ratings work. The credit rating agencies are NOT taking the fact that your only debt is your mortgage as evidence of financial irresponsibiity. They're only saying that there is little historical evidence of your willingness and ability to borrow and repay, nothing more.

 

[ziggy29]

The only change to my credit cards is that one of them has watered down the value of "points" for air travel. As their cash back hasn't changed and that's the option I choose, it hasn't affected me. Plus, this is only a 1% cash back card and these days I mostly use the Schwab 2% Visa card.

 

[youbet]

Liz Pulliam Weston's latest: Credit card lenders go on a rampage

Pulliam is exactly the type of person we don't need advising folks about their financial matters. Arguing that the use of expensive, short term, unsecured credit is good and/or necessary for typical Americans is nothing short of sabotage. Despite her outrage that rates are going up, even at previous lower rates carrying a substantial ongoing balance on a credit card is financial ineptitude. Why is she supporting that?

I hope credit card companies raise rates and terms to such horrendous levels that all Americans use credit cards only on a pay in full each month basis or simply don't use cards at all. IMO, Congresscritters need to spend more on educating the American public about credit and less on legislating to protect hapless spenders.

 

[Katsmeow]

I will never understand the thinking of credit rating agencies, if they take the fact that my only debt is my mortgage as evidence of financial irresponsibility on my part.

I paid mine off years ago, before I ever heard of Dave Ramsey. Did your contact at State Farm give you any idea of how big a price differential there is on car/auto insurance between credit rating based on one debt and credit rating based on no debts?

I don't think I kept it but in our recent insurance renewals there was a sheet showing how the rate varied based upon credit score. As a recall it was a significant difference.

I went and found an article at Kiplinger's which says "A recent survey by Consumer Reports among eight popular auto insurers found that drivers with top scores could pay up to 31% less on their premiums than if credit scoring wasn't factored in, while those with bad scores would pay as much as 143% more."

 

[ziggy29]

IMO, Congresscritters need to spend more on educating the American public about credit and less on legislating to protect hapless spenders.

I agree with you about the abysmal state of financial education, but I don't quite see how Congress should be involved. I'd love to see a semester of personal finance be a high school graduation requirement, but that's up to the local school boards and (in some cases) state requirements. I suspect Congress would only muck it up.

 

[youbet]

I suspect Congress would only muck it up.

Well Zig, the odds are certainly on your side there. Congresscritters can and do muck up most things they touch. But if they just had to do something about their preoccupation with personal credit and whether citizens are being "victimized" or not, I'd rather see them legislate funding for personal economics education than legislate detailed operating rules for lenders. It's hard for them to do since they vision themselves as heros riding in on the white stallion to help the hapless victim by shooting the bad guy as opposed to empowering the victims to stand up for themselves.

But, I certainly understand your point.