Rip Off Alert: Check Your Credit Card Annual % Rates

Smart consumers read their credit card statements each month, scanning for errors. Typically, one looks for mistakes in purchases and assured that there haven't been any unauthorized charges, files it away (or closes the on-line banking window, as the case may be.) Yet right now, the company most likely to steal from you is your credit card company, and it's very easy to not notice the hidden charges!

I got ripped off this week. As I was checking when a balloon payment is due for a major home repair I charged to a credit card awhile back, I decided to make sure all was well with my annual percentage rates (APR) on my business MasterCard while I was at it. Typically, I pay off my balance each month, but started carrying a balance this year. I wasn't expecting anything unusual, as I had an interest rate under 14%, a near-perfect FICO score, I always pay on time, and besides--I always had such good experiences with this particular credit card company (Advanta.)

Rarely do I read my paper statements, as I do most everything on-line. But have you ever tried to double-check your interest rates on-line? In my experience, most banks don't post it in your "my account" section. So after clicking every possible link, I gave up and fished through my files for a recent paper statement. Hidden on page 3, was my current APR that had been raised to 38.9%!

Yes, you read that correctly. The statement said they were charging me 38.9% interest. 

Immediately, I called them and was dispatched to a nice woman in India who verified that indeed, that was my current rate. "When did it go up?" I asked. "September," she replied. Shocked that I'd been paying that rate for 3 billing cycles now, but hadn't noticed how much more interest I was paying, I proceeded to ask her how they justified such an outrageous unannounced increase. After all, I always pay on time and I'm not even close to reaching my credit limit. This sounds like a mistake. It makes no sense.

Her lengthy reply was entirely scripted. First, she acknowledged how much they appreciated my timely payments and patronage, but that they are reviewing ALL of their customers right now. Anyone that is starting to carry a balance or that has a change in spending patterns is being deemed a candidate for default, and they have raised the APR's. I could tell by her voice that she is well versed in this particular script. There was no point in shooting the messenger.

Next, I asked to speak to someone that could help me renegotiate my rate. Without transferring me to another agent, she said, "I'll see if I can help you. Please hold." After a couple minutes, she came back with a new script and said, "We are prepared to offer you a rate of 18.9%." Can you believe it? So here I was, stymied that I was having to negotiate up 5% from my previous APR. Outrageous! 

I am now thoroughly angry at the Advanta credit card company that I used to think had the best customer service of all. From a business consulting standpoint, I find their strategy shocking too. Treating good customers as if they are bad, and ripping them off before they have a chance to default seems like it would inspire defaults. Madness!

Please, please, please don't let these companies get away with it! Check your paper statements for your current APR today. In fact, perhaps this is the time to get off of on-line banking altogether, so that you'll be forced to open the envelope and scan for sneaky surprises that might be lurking inside. Watch your back, even if you have a perfect credit history!

Other articles on this topic:

• ConsumerAffairs.com Complaints About Advanta
• BusinessWeek.com The Trouble with Credit Cards
• CNNMoney.com Credit Cards Gone Wild 
• USAToday.com Credit Card Rule to Curtail Unfair Practices in 2010

Be sure to let your friends know about this, too. There is a link to forward a link via email below. Thank you.

Comments

[Jaya Schillinger]

Oh boy, I've been getting emails this morning from readers who are subscribed via email delivery. These predatory lending practices are sneaking up on everyone left and right!

People have been mentioning the toothless credit card reform legislation that passed this week that is scheduled to go into effect in 2010.

They could make it illegal NOW if they wanted to. The card companies were able to implement their interest rate frauds quickly enough! There's absolutely no reason that the law can't go into effect immediately.

By next year, the banks will have spent all their bail-out money. Right now, I think they are trying to steal as much as they can from consumers, while also forcing a lot of them to go into default through these obscene practices. Then, in 2010, they will ask for another bail out.

All that law is doing now is putting them on notice that they better hurry up and steal as much from consumers as they can during the next year. I predict a modern Boston Tea Party brewing! A year is completely unacceptable.

[A Reader]

thank you so much for the credit article. I had a similar experience recently as well, I had a special supposedly locked in rate of 2.9%. In july when my mom was in ICU for 4 days I had my first late payment in 5 years. They raised my rate to 26.9%...retro-actively!, when I called I got the same crap you did. The worst part, I have 2 cards with them, they raised the other one too, from 7.9 to 24.9...no missed payments, just because of the other card.

[The Valentyne]

I recent had a run in with Capital One on a similar issue. With the interest rates down and my credit score up, I called up to negotiate my interest only to get it lowered from 15% to 14%. Ridiculous! With my HELOC being at 3.24% I can not use it because the housing market took a dump and they don't consider my home having the equity at this time. Talk about a catch 22.
www.365DaysOfSuccessesJournal.com

[Jaya Schillinger]

Sorry to hear that, The Valentyne. Stay on top of them!

I've been hearing lots of buzz about class-action lawsuits, as well as suggestions to report these kinds of things to the Federal Trade Commission.

Here's a link to file a complaint at the FTC https://www.ftccomplaintassistant.gov/

[Jaya Schillinger]

I read some potentially-good news tonight about Congresswoman Carolyn Maloney (Democrat from NY) is working on changing the Credit Card Reform bill so that it will start 90-days after Obama (hopefully) signs it, instead of in July of 2010.

Here's the article: http://maloney.house.gov/index.php?option=content&task=view&id=1766&Itemid=61

[Dawn]

Heres one that tops the cake. I was on-line in my credit card account with Capital One. When I checked the Balance Transfer offers on my account there was one for 0% for 6 months. I called in to the number on my card, confirmed with a representative the details of the offer. While I was in the middle of completing the balance transfer my phone call was suddenly cut off. In frustration I got back on-line, only now, the offer was gone from the list and the only one available was a transfer at my current rate of 26%, which was increased earlier this year from 2.9% after missing only one payment. I called the company back and was told the the offer had never existed. I was transferred several times to different representatives, who all suggested that I had read it wrong or looked at the wrong account. They all discounted the fact that it had been confirmed by one of their representatives and suggested that he too, had seen it wrong. I was told that no website or computer glitches had occured that day, per their inter-company memos, and that basically I was SOl. I obtained the ID#'s of everyone I talked to. I had not gotten the name of the first guy and they would not provide it to me. I find it amazingly suspicious that while in the middle of taking advantage of this offer I was cut off and then the offer suddenly and mysteriously disappeared from my account. I followed the FTC link and filed a complaint. But, unfortunately my guess is that it will result in nothing

[Jaya]

Dawn, that reminds me of the movie "Gas Light." They're trying to make you think you're crazy!

Can you imagine doing something like that to one of your customers? OMG, of course not! Corporate America has no soul. These call centers and multiple layers of gate keeping make it a dehumanizing experience.

[David Weber]

This credit card issue is soooo sleazy. I had a 2.99% for LIFE on one credit card. Suddenly, out of the blue, I was charged a 1 cent "transfer fee" (two YEARS after I had the rate) and a $10/month statement fee. And, of course, there is no way to pay these things off in one statement. They are added to your balance at a HIGHER interest rate then averaged. I called them up. They told me I still had 2.99% and I said no I did not since my effective rate was now over 6%. But, of course, they are all programmed to deny.

This ALL started in the Bush administration when all these credit card companies, lead by MBNA (now B of A). They said how they were "getting screwed over" by deadbeat customers not paying their bills and then declaring bankruptcy. Reality? ONE PERCENT of bankruptcies are caused by credit card debt. But Congress gave the credit card companies carte blanche since consumers were so evil by "taking advantage" of these benevolent companies.

I've even read of credit card companies charging fees FOR paying off your bill every month or NOT charging something every month.

What to do now? Follow Jaya's advice. NEVER apply for an 0% or low interest balance transfer as there is no longer any such thing when they add fees at will. Use your debit card and/or pay cash whenever possible. And complain to the FTC and such.

Long story short. There is NO such thing as a credit card agreement any more since it's not worth the paper it's written on.

[Jaya Schillinger]

Advanta is CLOSING ACCOUNTS. Here's the article about it on CNN Money!

http://money.cnn.com/2009/05/18/news/cards.advanta.fortune/index.htm?section=money_smbusiness

Have to say I agree that much of their problem with defaults is probably due to the fact that they jammed those obscene interest rate hikes through. Consumers have had it, and if it's a choice of who NOT to pay, most are going to default on the company that treated them the worst.

[Jaya Schillinger]

Someone just sent me this note about how credit card companies have already figured out how to get around the upcoming government regulations about unfair APR increases:

If you carry a balance on any credit card make sure you know what is going on. B of A and Chase are changing to variable rates, which means the interest you pay varies month to month depending on market conditions. Basically, it's another scam the banks are using to skirt the new, tougher legislative laws. There will be NO such thing as a fixed rate any more.

This is a good article about it:

http://www.latimes.com/business/la-fi-lazarus8-2009jul08,0,6843487,full.column