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Date July 11, 2009

Credit Cards Moving To Variable Rate

Last June, a number of credit card holders from major credit card companies JP Morgan Chase & Co. and Bank of America received notifications changing their fixed rate credit cards to variable rate cards. The variable rate will be tied to the prime rate.

Credit Cards Moving To Variable RateDiscover Financial also made a similar move earlier, moving some of their fixed rate credit card holders to variable rate credit cards this March. According to the spokespersons of these credit companies, the move was made primarily for these companies to be able to manage their business costs better given the change in the conditions of the market.

For Bank of America, almost all of their customers holding fixed rate credit cards will be moved to a variable rate plan. There are going to be some exceptions, though. These would be card holders of student accounts, debt-assistance program accounts and a number of recently opened accounts. Bank of America credit card holders will not have the option to opt out of the planned changes of the credit company. They will also most likely see the changes in their bank statements this August.

Chase credit card holders, on the other hand will have the opportunity to opt out of the move from fixed to variable rate credit cards. However, should they opt out of the change, they will have to close down their credit card accounts. According to spokeswoman of Chase, Stephanie Jacobson, the change to variable rates was made by the credit company due to the “changing costs for funding credit-card loans”. Similarly, credit card holders of Discover were also able to opt out of the move from fixed rate to variable rate credit cards and, those who did, had to close down their accounts. Discover’s change was made effective last May 1.

The move to variable rate credit cards may be a pre-emptive move of credit card companies to counter the foreseen effects of the credit card bill. With the credit card bill in place, credit card companies will not be able to change the rates of their credit cards as easily as they can right now. By moving to a variable rate credit card model, credit companies can easily implement rate hikes without having to issue notifications to their customers. Fixed rate credit cards, on the other hand require credit companies to send notices to their customers in advance before they can implement rate changes. Furthermore, when the credit card bill becomes active, credit card companies will have to issue notifications 45 days before they change their credit card rates.

Date July 8, 2009

Interest Rates For Credit Cards Rising Before Credit Card Bill Comes

Many thought that the credit card bill would be the end of high interest rates and fees in credit cards, not least among them the lawmakers in Congress and the consumer advocates who backed the bill aggressively when it was still being debated.

Interest Rates For Credit Cards Rising Before Credit Card Bill ComesHowever, the leeway of several months that government has given credit card companies to adapt their business to the new legislation seems to have had a very nasty side effect. Now, credit card companies are using the available time to raise their interest rates and fees way ahead of the scheduled activation of the credit card bill on the first quarter of next year in preparation for stricter laws about arbitrary interest rate and fee changes. Needless to say, many are irked by the fact but are quite helpless about it.

Recently, Chase credit card holders found themselves burdened with a nasty surprise from their Chase credit cards. Chase raised the minimum monthly payment required from 2% to 5%.  As a result, many card holders were trapped between paying very high minimum monthly payments or getting their interest rates increased by several percentage points. Many of these card holders were also those who transferred their balances to Chase to take advantage of a low interest rate offer.

Chase, along with Discover also recently increased their maximum fee charges for balance transfers. Chase’s rate was originally at 3% while discover’s was at 4%. Both companies increased their rate to 5%. Carriers of Bank of America credit cards also saw an increase for cash advance and balance transfer fees of 4%, from a rate of 3%. The majority of credit card companies are also continuing to cut credit card limits for their customers while steadily increasing their interest rates. The rate of the credit cuts and interest fee increases have noticeably increased since January of this year.

According to experts, credit card holders can expect to see these kinds of practices from credit card companies until February, when the credit card bill becomes active. At the moment, credit card companies are under no pressure to stop these kinds of practices and can continue to increase rates while decreasing available credit without any penalties.

The situation is exactly what many feared would happen if the credit card companies were given too much time before the bill became active. Now that it is coming true, legislators are effectively powerless to stop the continuing onslaught of higher interest rates, higher monthly payments and dropping credits. Once the credit card bill becomes active early next year, credit will have become too expensive for regular consumers and they will have too look elsewhere for the privilege of paying in plastic.

Date July 5, 2009

Credit Card Companies Chasing Profits Before Credit Card Bill Goes Active

For many people, especially consumers, the passage of the credit card bill probably felt like a huge victory over the credit card companies. For many years, credit card companies have done their utmost to profit from their customers, from offering credit to subprime borrowers in exchange for excessive interest rates and fees to predatory practices such as sudden rate and fee hikes.

Credit Card Companies Chasing Profits Before Credit Card Bill Goes ActiveThe credit card bill was created to answer these problems and level the playing field for consumers. Unfortunately, even though the bill has passed, it won’t be active until the first quarter of next year. In the meantime, credit card companies are doing their utmost to cash in before the restrictions begin.

Currently, many of the major credit card industry players are raising their rates, presumably to help them gear up for the implementation of the credit card bill. With the restrictions in place, the biggest profit sources of credit card companies, interest rates and fees, are going to take a hit. It is going to be harder for them to raise interest rates, so they are raising their interest rates now, while the bill is not yet active.

Recently, Chase credit card holders experienced had an unexpected and unpleasant surprise. The credit company raised their minimum monthly payment requirements from 2% to 5%. Many card holders were caught unaware resulting in several thousand consumers now faced with large monthly fees. Chase has also increased their charges for balance transfers, something which Discover has also done as well. Bank of America also changed their transaction fees for cash advances and balance transfers from 3% to 4%. Along with Citibank, Bank of America is also continually cutting their credit limits lower and lower and raising their interest rates, a trend which has been on the rise not only among these companies but also with other companies since the start of the year.

Although many are complaining that these exploitative actions are worsening the financial conditions of the majority of consumers, it is hardly a surprising move by the credit card companies. The primary motivation of these companies have always been profit and, with their profits threatened, they are cashing in now as much as they can.

The biggest sector suffering financially right now are the consumers. Many of them are questioning the move of the government to give several months leeway for credit card companies to adapt to the new laws. Why the long months before activation? With new regulations in place, credit companies will have to update their systems and reorganize their current structure to allow for the changes being introduced by the credit card bill. Although, practically speaking, even if the law had been set to become active a month after it was signed, credit card companies would still have done their best to profit within that time frame and the credit card crunch would have been worse for consumers.

Date June 28, 2009

Chase Credit Cards Minimum Payments On The Rise

As the economic crisis continues, credit card holders carrying Chase credit cards are going to be in even worse condition. This month, Chase has just announced that they will be raising their minimum amount per month to 5%, up three points from the former 2%. Thousands of Chase credit cards are being affected by this worrying increase.

Chase Credit Cards Minimum Payments On The RiseThe increase seems minor to many observers and, in fact many Chase credit card holders will probably consider it as a mere annoyance instead of something serious like an interest rate or fee increase. However, for a select segment of Chase credit card holders, the effects of the increase are very disturbing.

The particular segment most troubled by the increase in minimum payment rates are those Chase credit card holders who are carrying large credit card balances and who are maintaining a very tight budget.

Chase customers who call up the company are usually told that the policy change is due to the economic slow down. Customers who tried to get Chase to lower their monthly payments were told that, while it is possible to negotiate a lower amount, Chase would increase their interest rate by several percentage points. Some customers report a rise to 21.99% from an original interest rate of 3.9%.

While Chase claims that the increase in minimum payments is due to the economic difficulties, an analysis from Consumeraffairs.com based on customer complaints show that the change has little to do with the credit ratings of Chase credit cardholders or how long their customers have been with them. Instead, the most common denominator among Chase credit cardholders complaining about their recently increased minimum payments is that they all mentioned that they took advantage of a promotion from Chase which offered a fixed rate at a very low amount. The offer was also given an extended time period.

There is a possibility that Chase is increasing the minimum monthly payment of their customers who have interest rates that are fixed and relatively low in order to increase collection of their low-interest profits. This will presumably be then rolled into loans with larger interest rates. Like most credit card companies nowadays, Chase probably wants to increase their profits now before the rulings of the credit card bill come into play.

Unfortunately, many Chase credit card holders are getting caught in a pinch. They have to contend with higher monthly minimum payments. If they want to keep their current monthly payments, they will have to deal with a much higher interest rate.