Mystified by Rising Credit Rates?

[dgriffin]

Notice your credit card fees going up?


By JOLEEN FERRIS

Story Updated: Jun 3, 2009

(WKTV) - If you've noticed your credit card interest rates have increased even though you're never late making a payment, you're not alone. Experts at Consumer Credit Counseling Services of the Mohawk Valley have been getting calls from people, mystified as to why their interest rates have gone up when they always pay on time.

Here's part of the reason why:

"A lot of it is because the default rate is climbing; people are losing their homes and eventually that will translate into more bankruptcy which is more loss so you have to make up that income somewhere if you're a lender," says Patricia Manley of CCCS of the Mohawk Valley.

CCCS has had some success negotiating lower interest rates on behalf of financially strapped clients, but the problem is--people are waiting until their situation is dire to seek help.

"What we're seeing is people using every dime of credit that they have before they come in to see us and a lot of times it's ending up in a bankruptcy so you can imagine what an increase in interest rates is doing to those balances," says Manley.


Actually, I'm not mystified by rising rates. The credit issuers are raising rates in advance of anticipated government action on credit card abuse. Obama has touted this as a protection of consumers, but I'm willing to bet the fine print digs a deeper hole in consumer pockets. It will be portrayed as a dose of what's good for you.

[concerned]

I was reading on AOL News just awhile ago that Discover Card has pushed up it due date in anticipation of the credit card reform. Apparently they want the additional 30% plus interest for paying late.

[dgriffin]

They used to put people in jail for those rates. Called loan sharking.

[Ralph]

A month after Chase bought out WaMu my interest rate (APR) went up to 31.99%!!!

And my monthly payments from $68 to 96 a month!

Pure unadulterated bullshit.

[gearofzanzibar]

Some chains are made out of steel, and some are made out of gold.

That doesn't change the fact that both make you a prisoner.

[chris]

Well I always pay my balance off each month so really don't bother to look but maybe I should just in case. You would think they should notify a customer in advance. Tha is one thing Obama should work on.

[lucy]

Ralph same here our interest rate went from being extremly low to 29.99%!!!! Only because we were a few days late paying. I understand what we did was wrong by paying late but we have always paid on time except that one time. We called to find out what we could do and we were told well if you pay on time for the next three months we will drop the rate to 14%. So we put on a few big chunks on it to get it down and it has been 3 months and they still won't drop the rate. Screw Bank of America!

[Clipper]

It is a known fact now that you must pay your credit card bill on time every month without fail. We are fortunate enough to be financially able to do so without hardship, and I thank God for that.

Our major card is one that Kathy had before I met her, and she has excellent credit. I was simply added to the account a few years ago. She actually got a letter in the mail a while back, and they were going to raise from from 8.5% to 12%. She called and raised hell with them, and they actually lowered her rate to 6%, which is almost unheard of in today's economy. We used the card frequently, but pay the total balance each and every month.

The mistake that most people make is to use a credit card for "long term" credit. I guess I was guilty of that when I was younger. If we need long term credit, a bank loan is the most stable and credible manner in which to obtain it. If the bank won't give you a loan, then it is probably an indication that you cannot afford to make the payments and can't afford whatever you are seeking a loan for.

It was a lesson hard learned for me. I was able to pay off any long term credit, and prepare for my retirement. It is something for young people to think seriously about. When you retire you will be most likely be limited in your income, and it will be less than you make working. I can't imagine living on my retirement income if I had the debt that I had when I was younger, and the interest to pay on loans and credit card bills.

I don't condemn younger people and criticize their financial competence. I have been there and done that, and sometimes it seems to be the only alternative when we use a credit card to bail us out of a short term problem by incurring long term debt.

My mom was a horrible offender when it came to credit cards. She used to buy stuff she didn't need because it was "on sale" and then pay for it with a credit card. Duhh, so much for the sale price, by the time the credit card added their interest. My mom used to sit in her chair with a handful of catalog's, her credit card, and a phone, and order stuff, some of which was still in her closet unopened when she died. We were getting her catalogs for a couple of years after she died becasue we had dad's mail forwarded to our house. Due to my dad's tremors and not being able to write because of it, he let mom take care of the bills. When she died, I had to call the credit card company and arrange a lesser amount in order to pay it off in full and relieve my poor dad of that burden. Without mom's check coming in, he could never have made it with the amount of the credit card payment. The minimum was high enough that very little ever went on the principle.

The moral of that story is that for a short term want or need, you pay back the principle many times over when you can't afford to pay the card off each month. Don't use long term credit to solve a short term cash flow problem. Credit card debt has become the scourge of young people's lives today. It is imperative that if you have credit card debt, that you get it under control, and manage it NOW, or else when you are retirement age, you will either be incapable of making it financially, or will simply be unable to retire, period.

Just some insight from a former financial Knucklehead that was in his late forties and early fifties before he became financially solvent and stable. LOL ( another clipper post that rivals the length of Gone With The Wind)

[lucy]

Wow clipper are you yelling at me? Geez..... I know what my husband and I did was wrong and got us into a little mess, and we are working very hard to get out of it. We have shut off and cut out a lot of things so we can pay all of our debts off. This one particular card we are almost done paying it off. It was the whole point they told us what to do and we went above and beyond and they still won't reduce the rate. I am on a mission to get rid of the debt we have so in a few years I can work part-time. That is my goal to work part-time and to have no debt but my mortgage.

[gearofzanzibar]

I was one of those cliche youthful offenders when it comes to credit cards. By my mid 20's I had racked up over 10K in debt on the cards alone, and even with relatively mild interest rates I was going to spend the next twenty years paying it off if I stuck to the minimum payment.

On my 24th birthday I cancelled the cards, cut them up, and started doing extra freelance work so I could pay off all my debts within two years. I just barely accomplished that and haven't had or used credit through a bank or lending institution since, although my SO keeps a card around for travel emergencies when she's outside the US.

From experience I can say that forcing yourself to live within your means can be a damn tough row to hoe, but the reward is an incredible sense of freedom. Until you're free of it you often don't realize how much of the frustration and misery in your life is caused by those golden chains wrapped around your hands and ankles. To paraphrase Tyler Durden, there's an entire class of Americans forced to do jobs they hate just so they can buy things they don't need.

[Clipper]

Not at all sweetheart. In fact, the post was not pointed at anyone in particular. It was simply the whacky old dude, passing along some more of unsolicited lessons he has learned from the school of hard knocks. Believe me when I tell you that I have been in worse shape than you guys are, and probably on many more occasions than I would wish to mention. As I said, I don't condemn any of the younger generation for the mistakes that my generation made ahead of them.

I think that half the problem with today's kids and older folks alike, with credit card debt is that the cards became too easy to get, the limits were set unrealistically high, and the number of cards that are marketed on a wholesale scale. I blame the credit card providers with deceiving the inexperienced and young with their advertising, and their famous "You have been pre-approved" mailings. Even on our major card, we still get mailings with line of credit checks enclosed, encouraging us to write checks against our credit line, or consolidate. We shred them as soon as they arrive, and do not fall for the enticement to increase our balance and owe them more than we can pay off monthly.

I keep a Sears Card, and a Lowe's Card, simply to take advantage of sales items and discounts when I really need something like an appliance or a tool. I recently saved $70 on a table saw through the Craftsmen Club by using my sears card, but I paid the bill in full when it arrived.

Kathy has a couple of department store cards that she has been able to save a lot on Christmas items with, by shopping the special sales and door buster specials with her credit card, but she also always pays the entire balance every month. Otherwise there is no savings to be realized by shopping the sale.

Having a wallet full of different cards is a liability in many cases. Major oil company cards are no longer a great savings. There was a time when money was saved by purchasing your gas on a credit card, but now, it is just one more item that can get out of hand unless it is paid in full monthly. In fact many stations charge more per gallon for credit card purchases.

Don't be offended Lucy. You have done nothing that most of us have not done at one time or another, and you certainly don't need to be ashamed. I would not yell at you darlin. You are one of my favorite young people here at the forum. I hope to meet you guys in August at the picnic. Not only that, but Frank might beat me up if I piss you off, haha. He IS the candyman after all, and he is bigger, and stronger than I am, LOL. Rumor has it that he has put away a reserve supply of candy for the candy jar, so it will be overflowing with goodies when he brings it to the Clipperfest.

[Clipper]

I agree with your SO Gear. You HAVE to have a card now if you travel. Hell, you can't rent a car or make a motel reservation anymore without a credit card number to secure the reservation or security deposit.

I can remember when I first used to travel for the Air Force on business, you could put down a $100 cash deposit for a rental car, but that has been many years ago.

We often secure or guarantee a reservation with a credit card, and then pay cash when we check out.

Today's world almost requires a credit card to do business or travel, but the key is to manage the balance and pay it off monthly.

I consider a credit card like "borrowing from myself". If I am not going to have the money to pay it at the end of the month, then I can't afford to "loan myself" the money to begin with.

I ended up doing precisely what you did Gear. I cut up the cards, and worked part time to pay the balances without impacting my every day budget too badly. Many many hours I drove a truck or a bus and sent the check directly to the credit card lenders as soon as I received it.

[dgriffin]

I was lucky enough to have a decent income with which I avoided very much use of credit, but I watched others with whom I worked "leverage" similar incomes to buy bigger homes, toys and vacations. Sure, I sometimes felt a bit embarrassed driving around in a rusty Pinto wagon and working for twenty years on an old house at a pace that matched my spare cash position. But when my spouse and I really wanted something special, we could usually go out and buy it without guilt and debt. I got myself through graduate school and my kids went to college and I was able to retire early. And yes, I'm proud of it, although I recognize I was lucky at times in my life and the recipient of grace at other times.

And I was blessed with a partner who pretty much sees financial things the way I do. She'd laugh to hear me say that, and recall all the arguments we had about money. But I can't imagine living successfully with someone who has a completely different view of money.

[Clipper]

Kathy is also fairly frugal, and very sensible with money. We have one vice to claim, and that is that we save for a few months and take about $1000 to the casino a few times a year. It is relaxing and we stay in a complimentary suite and many of our meals are comped also. It always leads us to check out other things in the area, to shop and visit attractions. I guess everyone would consider that throwing away the money and quite often that is what happens at the casino, but the entertainment value and the trip away from home for a few days is worth it to us.

We live in a remodeled farm house that I have put a lot of blood sweat and tears into, and still am working on. It is small, but very nice, and has a nice piece of land and a great garage and outbuilding with it. Heck, if I lived in a brand new house, I would find something to tear into and remodel or improve on. It is my nature. I am addicted to sawdust and hammering. Nothing fires me up like the high pitched whine of a table saw or router slicing through a piece of good wood. LOL (must be a sick individual I guess. I must be getting old when wood is number one and sex takes a back seat, LOLOL)

[gearofzanzibar]

Jun 4, 2009 15:03:37 GMT -5 Clipper said:

Kathy is also fairly frugal, and very sensible with money. We have one vice to claim, and that is that we save for a few months and take about $1000 to the casino a few times a year. It is relaxing and we stay in a complimentary suite and many of our meals are comped also.

And that, right there, could save a lot of people from falling into the credit trap. There's nothing wrong with saving your money and spending it on something you enjoy, but financing that brief pleasure with long-term debt is a recipe for disaster.

Nothing fires me up like the high pitched whine of a table saw or router slicing through a piece of good wood.

It's the POP! and hiss of a welding torch that does it for me. I love wood, but there's something about mastering metal that's seductive. Then again, it just might be a great excuse to play with fire and drink cold drinks.