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Even Personal Finance Writers Make Mistakes

Nancy Trejos

I recently opened the monthly statement for my MasterCard.

When I read it, I gasped. No, not because my balance was ridiculously high. I actually had a zero balance on this particular statement.

What surprised me was my annual percentage rate for purchases. The last time I checked, it had been 15.24 percent. Now, it was 25.24 percent.

As a personal finance writer, I often get calls and e-mails from people who have had their interest rates raised, inexplicable fees assessed or credit lines suddenly cut. This has been happening with a lot more frequency in recent months, and card companies say it's because the cost of lending has increased.

Consumers are angry that banks that have received federal bailout money are doing this. The White House has taken notice and met with the heads of the major credit card companies yesterday. The House, meanwhile, will vote on a bill next week that will codify new rules that the Federal Reserve approved last December prohibiting what it called “unfair and deceptive practices” such as arbitrarily increasing rates on existing balances.

As a personal finance writer, I’ve been writing about all this, which made my interest rate hike ironic.

I am not, however, completely innocent here. For the last year, I have worked hard to get my finances under control. I have gotten much better at it. But in February, I screwed up with this credit card. Usually, I get online before the due date and schedule a payment. This time, I scheduled it two days after the due date. I was busily getting ready for a trip to the Middle East and juggling work with writing a book. I should have paid closer attention.

It didn’t matter that it was my first late payment on this card. It didn’t matter that the payment I sent in covered the entire balance. I still got whacked.

But why was I not notified of this change? Why did I have to find out by looking at my statement?

When I called my card company this week to find out, I was transferred from the customer service representative to a rate specialist.

“It was based on the higher cost of doing business due to the challenging economic environment,” she said.

She told me a letter notifying me of this change was sent out on Feb. 11. I told her I had never seen this letter. I left for the Middle East in the last week of February. The letter did not arrive by then. I was gone for about six weeks. When I returned, I went through my mail. I never saw such a letter. I went through all my mail again this week just to make sure. Still no letter.

At this point my cell phone cut us off (I will refrain from cursing my cell phone company here). I called back and was once again transferred to a rate specialist named Sonya. I re-told my story to Sonya. She had a different explanation for me. My two-day late payment triggered a default rate, she said. It could have gone up as high as 29.99 percent. I guess she told me that to make me feel better.

“But I’ve always paid on time. I was late once,” I said.

“One-time only,” she said. “It’s automatic. It’s under a default.”

Again, she mentioned this Feb. 11 letter. “Well what did it say?” I asked.
It notified me of the rate change, she said, and gave me until March 10 to opt out. If I had opted out by then, my account would have been closed and I would have been able to pay off my debt under the old rate. She offered to re-send the letter to me, as if that would do me any good. By March 10, I was in Beirut with no access to my mail. How was I supposed to opt out?

We kept going back and forth with no resolution. In the end, she told me to fax a letter asking for leniency.

Funny, I thought. One of the new rules approved by the Federal Reserve prohibits card companies from raising rates on existing balances unless the customer was 30 days late. That rule would have certainly helped me here, but it doesn’t go into effect until July 2010. On Wednesday, the House Financial Services Committee passed a bill that would, among other things, require credit card companies to give customers 45 days' notice before changing their rates. That provision won't go into effect until 90 days after President Obama signs it into law--if the bill passes the House and Senate and if he signs it into law. Again, that's of no use to me in this situation.

Okay, I realize I made a mistake by sending that payment in two days late. But given that I had been on time before and actually paid off my entire balance, did they really have to bump me up to a 25 percent default rate? I definitely plan to send a letter. Wish me luck.

By Nancy Trejos  |  April 24, 2009; 7:00 AM ET
Categories:  Consumer News , Nancy Trejos  
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Send the letter, but then line up a new card with a lower rate, and kick the old one to the curb. That's about the only recourse you have nowadays.

These card issuers aren't going to cut you any slack if it means they don't get to make money off you -- so you have to play the game to your advantage.

Posted by: jcbcmb68 | April 24, 2009 9:03 AM | Report abuse

I've had no problems getting a credit card company to make adjustments to charges or fees. I don't think I do anything special when I ask (it does help to start by being pleasant and nice), so I wonder why the difference?

My history is to pay the card off completely each month, which I assume puts me on the company's "disliked customer" list since they make almost no money off me. In the upsidedown world of credit, I always thought this would make them less likely to cut me a break.

Credit unions have the reputation for being nicer to their customers than regular banks. USAA is a very good company to deal with. To qualify for membership you need a military connection: current service, past service, relative with current or past service, and I think they're extending it to civilians who work for the military.

Posted by: fitday19550 | April 24, 2009 9:39 AM | Report abuse

Actually, jcbcmb68, think twice before cancelling a credit card. It can lower your credit rating if you cancelled when your rate was high, if you have changed cards several times, etc. I have been told that the fact that I have had only one credit card, and I have had it for over 25 years, is one factor in my high credit rating.

I generally pay my bill off in full each month, but have occasionally been forgetful with a payment, and once my rate increased. Also, if you fail to pay in full one month, you get charged a percentage of your new purchases for (I think) the following month as well. My dad taught me to pay extra in November to cover part of what I would charge in December for Christmas presents, so I didn't have a big bill awaiting in Dec. You lose the interest you would have earned if this money was in a savings account, but avoid the finance charge and interest you would have incurred if you didn't pay your bill in full. This keeps your rate down and yes, the bank doesn't like not making money off you, but it works better for you in the end.

Posted by: janedoe5 | April 24, 2009 11:16 AM | Report abuse

janedoe, in this case I think the outstanding balance matters more than the interest rate. Since Ms. Trejos' balance is at zero, that will not cause her much of a problem in getting a new card with a low rate, assuming a good payment history and low debt-to-income ratio.

Posted by: jcbcmb68 | April 24, 2009 1:18 PM | Report abuse

Well, I was thinking about the effect your credit rating has on the interest rate you qualify for when getting a mortgage or auto loan. When you check your credit report (or a bank does), you'll see all the credit cards you have had in the last ten years. For a current card, the current balance and minimum payment due shows. Highest balance and history of late payments shows for past credit cards, but a lot of cards in your history would indicate that you jumped to get lower rates. And, the more cards you have had (whether or not still active) the lower your credit rating will be, making it more difficult to qualify for bottom rate mortgages. So if you can find a way around a temporary rate hike (e.g., be extra diligent about paying on time) and call to find out how soon you can request a rate reduction, this would be a better solution than getting a new card. Because if you pay off your bill each month, it doesn't matter what your rate is. That's my basis for suggesting a way to keep the old card.

Posted by: janedoe5 | April 24, 2009 10:49 PM | Report abuse

Your careful and responsible handling of your finances does not matter to credit card companies.

They are the new un-elected financial congress levying hirer rates of interest on you, in much the same way Congress levies taxes.

Your credit card debts are now practically non-dischargeable, much the way tax debts are, thanks to bankruptcy law "reforms" that limited constitutionally protected bankruptcy relief for individual consumers, though not for corporations. (Odd and counter-intuitive, since individuals have rights in the Constitution, while corporations do not.)

The entire credit record/credit scoring system turns out to be a diversionary distractor, as the credit card companies charge whatever they feel like charging you, as you so aptly pointed out in your example.

But what's worse than indiviudal losses because of illegalities and fraud committed by credit card companies, under cover of contract law, which they themselves do not respect on their side of the bargain, is that these financial companies are sucking all the liquidity our of the financial system, on the top from the feds, and below, from consumers.

In this way there is no liquidity available for economic recovery in this nation.

Goverment relief for various sectors is limited because it all goes literally out the window at the fed.

And consumers cannot spend on cars, or homes, or education, or durable goods, or any other part of economic production, what they must pay in accelerated interest charges on old balances owned by our swollen financial sector.

The trading of money, which in reality, produces nothing, but a measure of convenience, has displaced real nuts and bolts production, in our economy.

The finacial sector in the US has grown exponentially, over the past few decades, and now, appears poised to shut out/shut down, every other sector.

Posted by: secretscribe | April 25, 2009 11:12 PM | Report abuse

Credit Slave - A person who can't manage money. Has never learned to live within their means. Financially ignorant.

Posted by: johndoe46 | April 26, 2009 5:58 AM | Report abuse

About your credit rating. Ask yourself what you need a high credit rating *for*?

The usual answers are a mortgage, a car, a credit card for expenses. Now break it down: do you already have a mortgage? Do you already have a car and/or car loan? Do you have enough credit to cover whatever you can't pay cash for?

If the answer is yes, then you don't need a really good rating *right now*. You can make changes now and reap the rewards later. The rewards are better credit cards (cheaper, lower rate, less available debt) and a better credit rating when you actually need it.

Posted by: fitday19550 | April 27, 2009 9:02 AM | Report abuse

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