Cardholders encounter unexpected credit hurdles
Al Anderson had his credit card for a decade or more. ■ He paid his bills on time. He rarely carried a balance. He thought he was a good customer. ■ Then, a couple of weeks ago, he got a notice from Capital One that his interest rate was rising from 9.9 percent to 17.9 percent. ■ “To me, that’s a slap in the face,” said Anderson, a 69-year-old retiree who promptly canceled his card. “I would understand if my credit history was bad or I hadn’t made payments or gone over my balance, but I never have.”
Aregia Hall felt similarly slapped in December, when she saw that the rate on her Nordstrom card had risen from 19.4 percent to 22.9 percent. It was a variable rate account, but Hall, a 49-year-old trying to establish a credit history, found the terms of the deal confusing and said she couldn’t get a satisfactory answer from a customer service representative when she called to ask about it.
“I asked, ‘Why is there a difference?’ ” she said. “They said it’s because of our bad economy and we’re losing customers.”
Banks, retail corporations and other lenders are raising rates on credit cards in recent months – in part, they say, to cover losses from a growing number of unpaid accounts and because of the increasing risk of lending during a recession.
Regulators and lawmakers, meanwhile, have begun trying to impose more restrictions on card issuers. The Federal Reserve has adopted new regulations that prevent companies from increasing rates on existing balances and extending deadlines for late payments, though they don’t take effect until next year.
A bill in Congress would add even more regulations on cards, banning “any time, any reason” rate hikes, retroactive rate increases and other practices.
“At a time when our economy is in a crisis and consumers are struggling financially, credit card companies in too many cases are gouging them, hiking interest rates on customers who pay on time and consistently meet the terms of their credit card agreements,” Christopher Dodd, chairman of the Senate Banking Committee, said at a Washington hearing last month.
Opponents of the bill say it would further hinder banks and lenders from offering credit to consumers.
Pam Girardo, a spokeswoman for Capital One, said last week that the company was raising rates because of the “current risk environment” stemming from the poor economy.
She said the company had not raised its rates since 2007, and noted that customers could choose to reject the new terms and pay off any balance under their previous rates over time.
Raising interest rates is just one of the changes that lenders are making on cardholders, who are also seeing their credit limits shrink, minimum payments change and new fees added. The changes are sometimes announced in notices that are incomplete or difficult to sort out, critics say.
“Most people don’t read that fine print,” said William Hall, Aregia’s husband.
Anderson, who rarely used his card and paid it off quickly when he did, said he decided to cancel his account when he received the notice of increased interest rates.
“Normally when you call up to cancel a card … they try really hard to keep you,” he said.
But not in this case. Anderson wonders if lenders are trying to get rid of people like him – who don’t carry balances or pay much interest.
“I think Capital One is trying to get rid of all the people they’re not making any money on,” he said.
Aregia Hall also canceled her card. She was offered a better rate to keep it open, she said, but that didn’t make her any more inclined to stick around. She wondered why she hadn’t been offered that rate to begin with.
Now Hall’s got a balance of $466 on the card to pay off, and she’s feeling bad about the whole experience. She had almost no credit history to begin with – she and her husband live on his VA disability checks, and she wanted to establish an independent record for herself.
“That’s the only reason I did this, was to build the credit,” she said.