Banks worried, you have to laugh!

blackcat333March 12, 2006

I just read a story that the big banks, namely JPMorgan Chase and Citibank, are now worried that consumers will not be able to pay their credit card bills. Well, duh! Now, I absolutely believe the majority of people have credit card problems because they used credit unwisely, but the banks are also to blame in a big way. They issue cards at a "fixed" rate which turns into a rate which rises every month. They lobby for the government to raise minimum payments. They create booklets of information about your credit card terms that even contract lawyers can't decipher. How ironic for them to cry foul. I watched the Frontline show on credit cards, and, boy, is the system messed up!

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I consider myself a financially responsible person, but I have to say this serves them right. Making it harder for people to declare bankrupcy doesn't mean they will get their money.

    Bookmark   March 13, 2006 at 8:28AM
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Raising the minimum payments on credit card balances is actually pro-consumer in the long run and will greatly reduce the amount of interest the credit card companies collect. I'm skeptical that they lobbied for the change, which, by the way, was not part of the recent bankruptcy reform bill, but rather was a regulatory change announced by the Office of the Controller of the Currency in 2003.

    Bookmark   March 13, 2006 at 9:31AM
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Yes, having people pay a higher minimum does help consumers in the long run. However, when you promise someone a certain low interest rate, say 7.99%, then it goes up to 22%, even when someone is always on time with payments, I think things are getting a bit ridiculous. I guarantee credit cards companies are making money on interest. It's almost a bait and switch situation.

MBNA, to name one company, contributed heavily to political campaigns and is a leader in "universal default". I am not skeptical there was lobbying going on.

    Bookmark   March 13, 2006 at 10:44AM
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The credit card companies did a ton of lobbying on the bankruptcy bill, and do lots of political lobbying in general. I was refering specifically to the OCC regulatory change on minimum payments.

There's a reason why they call those low 7.99% rates introductory. Anyone who thinks that they're going to pay that kind of rate forever isn't reading the terms, or doesn't understand how interest rates relate to the type of debt. Go to and shop for a better deal.

    Bookmark   March 13, 2006 at 10:53AM
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I understand the banks fear more "write-offs" because some people can't make even the minimum payments. And guess who will bear the brunt of these write-offs? The people who DO make payments. In the form of higher interest and higher fees,both front-end and back-end.

    Bookmark   March 13, 2006 at 11:59AM
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It would also be nice if every retailer would stop offering to open yet another credit card account in order to get a little discount. I think I have only once taken them up on this because I was making a major purchase and the discount was significant. DH on the other hand thinks this is a good thing since we pay off all our bills monthly anyway. He likes having an excellent credit rating and I think I've finally convinced him to stop doing this because opening all these accounts - even if you do pay them off - isn't a plus for your credit rating. I recently started canceling the various accounts he's opened - some close automatically if never used. I discovered he's opened more than one at some places. What a some ways I feel sorry for people really trying to get out of debt and quit using credit cards. It's like a drug addict encountering a dealer every time you go shopping. I even had someone put the full court press on me at the grocery store!!

    Bookmark   March 13, 2006 at 1:17PM
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Back in the olden days, the credit card companies justified high finance charge rates because interest rates generally were very high. I had a money market account in the mid-80s that was paying 15% for a while. Those days are long gone, but the credit card interest rates never dropped.

Some people have long-term low rates. Generally, they are those who have platinum cards based on income and very high FICO scores. Ironically, they are probably the ones who pay off every month, so that the bank only makes money on the percentage they charge retailers when their customers use the card.

    Bookmark   March 16, 2006 at 8:57AM
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I wasn't referring to introductory rates. I was referring to fixed rates. Then the credit card company has to give at least 15 days notice that rates are going up. Usually, they send a folder of small print to explain this. Of course, you may opt out and then your account is closed.

    Bookmark   March 16, 2006 at 4:00PM
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also, it just occurred to me if the credit companies were so concerned about loosing money, they would lower the spending limits. Or at least, they should make it harder to qualify for a higher limit. This would lower their risk and probably help keep their customers from over extending themselves to begin with. I think I have a combined credit card limit well of over $100,000. And quite frankly, I could easily get by with $10,000. I don't carry balance. Just use for monthly expenses and emergencies.

I got my first credit card while in college. It was a Sears with a $500 spending limit. I carried it for years and never abused it.

"Whats in your wallet?"

    Bookmark   March 17, 2006 at 1:39PM
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