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Congress addresses drastic credit card interest hikes

Congress addresses drastic credit card interest hikes

(Credit and Money Matters) Permanent link

credit debtTicked off by sudden spikes in credit card rates? You're not alone. Congress is on it.

An All Consuming reader writes:

What, if anything, is being done by the AGO to counteract the blatant credit card rate increases to 30 percent (3X original rate) when an overdraft or late is recorded – with no real or viable way to get that reduced?

Now, after perfect payments, (the card issuer) says that because I have a heavy load of credit and not enough income, they cannot reduce the rate.  They suggest credit counseling and bankruptcy and other extreme actions when a simple rate/payment reduction would solve the problem.

Is that not counter to logic, truly ramming it to consumers, being very inflexible and adding fuel to the fire? If they do not reduce rate, it could make things worst.  I am not asking to get down to the original 11%, but for something lower than 30%.

- Escandar

Citing economic conditions, American Express, Bank of America, Citibank, Capital One, and HSBC are raising rates – and sometimes lowering credit limits – on potentially millions of credit card holders.  It can happen to you even if you’ve never missed a payment deadline!

The Wall Street Journal reported last month that Bank of America plans to raise interest rates for as many as 4 million card holders starting with their June statements. Any customer who carries a balance and has an interest rate below 10 percent would see that rate jump into double-digits.

The feds – not states – have jurisdiction over most banks. As I type this, Congress is racing to put new restrictions on card companies.

The New York Times reports that a proposed U.S. Senate bill goes further than its House counterpart and would prohibit companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then would require the rate to be restored to its previous level if payments were on time for six months. Consumers would have to be notified of rate increases 45 days in advance. Companies would not be allowed to charge late fees if they were late in processing a payment. However, the U.S. Senate on Wednesday rejected a proposal to cap interest rates at 15 percent. The bloggers at Credit Slips offer an interesting analysis of the bill.

If your interest rate spikes, the Better Business Bureau suggests you contact your card issuer and try to negotiate a lower rate. If you don’t get anywhere, pay off the account and shop for a better deal elsewhere. Bankrate.com is one site to try.

But think carefully before you close the account. Closing an account – whether it’s done by you or the lender – can have temporary negative impact on your credit score. This is due to what’s called debt utilization – the ratio of your total debt to total credit limit – and it counts for about a third of your credit score. Read Herb Weisbaum’s MSNBC column for an explanation. If it's your oldest account, that can also hurt your score.

As for paying your bills late, that’s the worst thing you can do. So get them in on time. As we mentioned in Monday’s All Consuming blog post, those bills are usually due by 2 pm EST on the deadline date -- although that too could change if this law passes.


 What do you think about the proposed Credit Cardholders Bill of Rights? Has your credit card interest rate changed lately?

 

[UPDATE]: President Obama signed the CARD Act in May 2009. Here are some related blog posts:

Credit card bill: the end of fees or the beginning?

Credit changes filling the mail

U.S. House wants to speed up new credit card rules

Posted by Kristin Alexander All Consuming Blog Moderator at 02/16/2011 11:01:39 AM | 


Yes! Both of our Bank of America accounts went sky high without us having a late payment ever. We always pay early and over the minimum payment. They raised it to a "variable" rate and won't tell us what that is going to be. She said it could be 16.9 or 29.9. So when is the "interest raise" law going into effect? This is the best law they have ever passed. I think they need to do more and stop predatory lending to people who can't afford the cards.
Posted by: Lola Merriman ( Email ) at 5/22/2009 12:22 PM


Hi Lola,

Most provisions of the new law go into effect in Feb. 2008 and some start in August. But unfortunately, the law isn't retroactive so there's no guarantee your interest rate will go down. Check out our May 27 post on this topic, linked here. - Kristin
Posted by: Kristin Alexander -- All Consuming Blog Moderator ( Email | Visit ) at 5/27/2009 4:50 PM


So the Credit Card Reform Bill doesn't go into effect until June 2010; how does that address sudden interest rate hikes by credit card companies?
Posted by: Mary ( Email ) at 7/20/2009 8:05 AM


I pay my credit cards on time and I pay more than the minimum requirements and one of my creditors is raising my interest rates from 7.99 to 19.99 how can this be? where is the protection of the consumers? I had thought the government had passes a law to help us consumers? I have written a letter refusing this increase and what good does this do me? they will close my account and my credit score gets affected. I work hard I pay my bills then I get to get penalized? this company or bank which is barclay bank or the name of the credit card is juniper. the sole reason applied for this card was the low interest rates.
Posted by: melody ( Email ) at 7/29/2009 5:28 AM


Honestly I am dissapointed I know the Law will take in affect in August for not hiking the interest rates. well, chase just raised my interest from 10.99 to 17.99% even though I make big payments each month and never been late on any payments. Please stop them !
Posted by: Mrs. Smith ( Email ) at 7/30/2009 8:30 AM


WE NEED A CLASS ACTION SUIT AGAINST CREDIT CARD COMPANIES for DEFERMATION OF CHARATER
• Pinging the credit reporting agencies – alone lowers the credit score.
• Raising interest rates (the amount they did) flags us as a RISKY customers
• Raising interest, increases monthly minimums – again changing net to worth ratios
• Lowering our credit limits shows us as Credit Risk.
• Domino affect, one credit card company makes you a risk therefore other card companies follow suit.

Basically – we are screwed no matter what we do.
• If we pay the credit card companies off, and close the account, we get a ding on our Credit Score up to 30%.
• If you keep the card open and not use it, those that have yearly fees, have to pay that.
• We cannot control when they ping the credit report so we are screwed there.
• A credit report score tells the business world what kind of person you are. If you are not a risk, you have many doors open to you, and you feel good about yourself and your accomplishments in life.
• A credit score allows banks to determine if they will lend to you, to open a small business, if that is what you want to do.
• Employers look at credit scored to determine if you are a responsible person. If you are seeking a higher paying job, companies want people that take control of their financial situations.
• With a lower credit score, if you are in the market to change your Auto, Health, or Home insurance it will determine how much you will be charged for coverage. If you are a “risk” you will be charged more regardless of your driving history, health conditions, or ability to pay.
• They have caused good payers to suffer extreme mental anguish.

[BLOG MODERATOR'S COMMENT: COMMENT EDITED PER AGO BLOG COMMENT POLICY]
Posted by: G. Griffin ( Email ) at 8/16/2009 3:20 PM


My interest rate with my Sears Credit card went sky high to 21.75%.
I have an excellent credit rating, never late with a payment and pay far over the minimum......Now I have to pay it completely down to zero....and keep it open....If I close it, the company will report a negative and it will reflect on my credit rating. The customer service people are receiving all types of abuse...it is the Ceo's who should have to answer our calls.
Judith
Posted by: Judith Baker Montano ( Email ) at 8/22/2009 1:06 PM


[EDITED BY AGO BLOG MODERATOR PER COMMENT POLICY] interested in a class action suit against Barclay Credit Cards? and we need to do this. look at how many of us are getting screwed by this bank! I was traped by the change in due dates and was told I have a late payment in Jan 09--well now I have a 22.24% on this card. with a bill due for $221.48 and a finace charge for $220.48!!! one dollar is going to pay the balance. So if I pay Barclay for 5 months--they get $1000.00 plus dollars and 5 dollars goes to the balance. I'll be DEAD and never get this card paid off! the mob has better deals than this bank. interested in a class action suit against Barclays Credit Cards? How do we start?
PLEASE someone help.
Posted by: Dwayne Laky ( Email ) at 10/1/2009 5:07 AM


I have an HSBC account and my adult son has one too. He recently got a notice of interest rate change from the current method to one which stated they would be changing to the daily Wall strret prime rates. they gave an opt out option which locked in his current rate and closed his account. I did not get the notice yet and am wondering if they have to send one to everyone or just some. There was no explanation of how that would affect the interst rates as far as the percentage going up or what??? I want to know how that affects my account and if it is legal? His notice said it will take affect the first of Dec. 2009. Do you know about this?
Posted by: Lee Cook ( Email ) at 10/2/2009 6:22 PM


Closed my Barclay credit card due to an increase from 15.9% to 21.9%.Called and was assured that I could pay off card at 15.9%. My last statement has me paying off card at higher rate. Called and was told I had to submit in writing my intention to close card, and it was too late even though card was closed with promise from co. rep. that lower rate would prevail.
Posted by: george kelly ( Email ) at 10/28/2009 7:45 AM


This is nothing more than price gouging as they know the government is stepping in around Feb. 8th. If gas stations did this they would be fined heavily. I thought there was a law against price gouging. I wonder what would happen if everyone just shredded there credit cards and did not pay them. They are ruining us anyway so why not?
Posted by: Margie Lieberman ( Email ) at 10/28/2009 9:16 AM


WE THE AMERICAN PEOPLE NEED HELP AND NEED IT NOW AND FAST FROM CONGRESS & SENATE. THAY CREATED THIS MESS WITH THE BANKS & THE CREDIT CARDS COMPANY THAY ARE RUNNING WILD BEFORE THE NEW LAWS GO INTO EFFECT. JACKING UP INTREST RATES. AND REDUCED LIMITS AND WITH NO NOTIFACTION ON EVERYONE. IT DOES NOT MATTER IF YOU MISSED PAYMENT OR MADE ALL. WE HAVE PLAYED BUY THERE RULES AND WE STILL GET SCREWED. I HAVE A WELLS FARGO CARD 22 YEARS AND NOT ONE BAD MARK 22 YEARS CALLED SAID NO HELP ON INTREST EITHER ACCEPT OR OPT OUT!! CONGRESS DID HAVE A CAP ON INTREST RATES AT 15% IN THE NEW LAW BUT THAY DID AMEND IT OUT . I DONT KNOW WHY ARE THAY SCARED OF WALL STREET ? IT WOULD HAVE PUT A BITE IN THERE BILL COME JAN. WE NEED A CLASS ACTION LAWSUIT AGINST THESE THEIVES. PLEASE PRESIDENT OF THE UNITED STATES AND CONGRESS AND SENATE FORGET THE HEALTH CARE BILL FOR NOW ! THERE IS A REAL EMERGENCY AND A NATIONAL DISASTER BREWING AND IT IS IN THE USA. BY THE BANKS ! PLEASE KEEP ME INFORMED ABOUT A CLASS ACTION LAWSUIT!
Posted by: Rick Edel ( Email ) at 10/31/2009 7:40 PM


I have 4 credit cards 2 are from citi bank and the other one is hsbc I am being forced to close them all due to the intrest rates just went sky high i was at 9.99% and they just jumped up to 29.99% I have worked so hard to keep good credit but if I don't close them I will never pay them off with that rate they would be getting 2,000 a year for one of my credit cards Im interested.
Posted by: Nicholas Trusas ( Email ) at 11/5/2009 5:41 PM


My wife and I each have a Juniper/Barklay card. They sent letters a few months ago telling us they were going to raise the rates. The letters said if we did not agree to the increase, we could close our account and continue to pay off the accounts at the existing interest rate. Our current statements have a much increased interest rate. When Juniper was questioned, they claim there is no record that we called to close the accounts. How convenient! It seems the banks are after the American people, the ones that can still pay their bills, to bail them out of their financial problems. While they are at it, more will have their credit ruined, or be forced into bankruptcy. But it isn't personal. They don't know you or I. They don't know our children. They have no personal interest in our well being, financial or otherwise. Does the Government truly care? It does not appear so. These companies are being allowed to severely impact millions in a financially devastating fashion, during one of the worst economic periods in our history, and all we hear about is a health care bill. I guess we will all see who is left with any ability to purchase Homes, Businesses, or other big ticket items after the CC companies finish {edited by AGO blog comment policy} us.
Posted by: John Wallace ( Email ) at 1/4/2010 8:28 PM


I with all of the emails posted in regards to the credit card increase, I thought that the intent of Washington was to help the American people. Instead the greedy credit card companies and banks after several years of having huge profits during the predatory lending period, causing the largest economic downturn since the great depression and receiving tax dollar bail outs is now gauge the American people. The American people need to stand up for their rights and need protection. Please include me in any class action suit to stop the correption and abuse of good standing citizens.
Posted by: Marianne Eid ( Email ) at 1/13/2010 6:08 AM


how is that the banks can can charge you enough interest rate to keep your credit card bill to never go down...i pay usually more than required monthly payments and the interest rate will jump up to 45.?% interest and put back on your account more than was there the previous month. say your pay two hundred and the bank will add 270.oo how can they mdo this..the government needs to step in and let the people pay down their bills ..so we can turn around the spending..if we give all our money to the banks == all the other businesses will never make any money to turn the economy around so all can keep their jobs and pay the bills...and live
Posted by: teresa ( Email ) at 2/8/2010 5:28 PM


I paid capital one on time for years at a fixed rate of 5.9 and they jumped it to 15.9 I called them to complain and they refuse to help so Im going to not pay them and have a black mark put on my perfect credit
Posted by: richar rodrick ( Email ) at 2/16/2010 4:48 AM


I agree with everything these people are saying. All my cards were at 9% or lower untill Washington started the credit card deal and I remember clearly hearing the card companies say they were not going to raise any rates, what liars. Now the have all doubled the rates and I always pay on time and above the minimum on the cards and the thieves running the banks used my tax money to get themselves out of throuble and now they are stealing from the public to make huge profits and pay the tax money back to the government. [EDITED PER AGO BLOG COMMENT POLICY.]
Posted by: Dwight Morris ( Email ) at 2/16/2010 12:12 PM


I am also frustrated with these back alley business practices against the very people that pay the taxes to bail these big banks out. I have a card from Citi Bailout Bank that I will be forced to cancel because rates jumped to 29.99%. Very unfair! Shame on everyone who has the power to do something but sit back to watch peoples homes and Families destroyed because of these practices.
Posted by: Steve Michalak ( Email ) at 4/19/2010 5:23 PM


Does anyone on this blog understand that you have Supreme Court Justice Brennan and the other old coots that sat on the court back in 1978. (Marquette Natl. Bank of Minneapolis v. First of Omaha Service Corp. Thanks to the unanimous court decision, States dumped there usurey laws because there was no way of competing with South Dakota and Maryland which sold out to Citibank. The rest is history. Thank your worthless Supreme Court, everyone one of them in this decision also ruled in favor of abortion (excepting White and Rhenquist)....so make sure you know who to thank. Then thank your Congress for not having a spine and refusing to cap ccard rates. Even a floating, adjustable cap tied to the prime rate would be fine....oh no, not our worthless government officials. By the way, in most civilized countries the legislature can ammend any Constitutional court decisions, but not here in Uncle Sam's Plantation.
Posted by: mary jane ( Email ) at 10/4/2010 12:08 AM


Amen!!! I'm in the same boat and something needs to be done about this!! My excellent credit rating is going to be destroyed if something isn't done soon! I've never paid a bill late... But I'm being backed into a corner now because I was a good standing customer. What is wrong with this picture???? I'm in for any class action suit! Please... I've worked too hard to have this all destroyed now. What's the point in being responsible if we are going to be punished for other's irresponsibility?! I was at 0% - 6% interest rates that jumped to 17% - 22%!!! For no wrong doing on my part!!! That's crazy!!! Had to put a roof on my home... etc... taxes went up... etc.. so debt went up in which I thought I'd be able to bring back down... I would have been able to if it weren't for these hikes!!!!
Posted by: Sherri ( Email ) at 2/15/2011 12:22 PM


I thought I'd point out that many readers seem to be posting on this old news story and perhaps may not be aware that President Obama signed the CARD Act in May 2009. I've included links to later blog posts above. - Kristin.
Posted by: KRISTIN ALEXANDER, BLOG MODERATOR ( Email ) at 2/16/2011 10:58 AM


It is now 3/28/2011. Just recently about 11/01/2010 my credit card holder citibank has raised by interest rate for no reason to 29.99% I have going to take charge america, and have called them on numerous occassions to get it lowered. the only responce I receive from them, is that they don't have any promotions going on right now. I believe that credit card companies should base their interest rates on, on-time payments, etc. I think that credit card companies could treat their cardholders in a respectful manner, rather than like trash.
Posted by: Jennifer ( Email ) at 3/28/2011 9:54 AM


you can still opt out from credit card interest rates increases, and cancel your credit card
Posted by: John Robinson ( Email ) at 8/31/2013 1:15 PM


I think that's dumb that your limit can be lowered despite the fact that you have made every payment on time. Though there isn't a whole lot we can do to control it.
Posted by: Government Loan Pro ( Email | Visit ) at 10/16/2013 12:52 PM


i like your credit risk information
Posted by: tara ( Email ) at 1/3/2014 11:25 PM


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