on my mind
by arlene winkler
almost threw the envelopes into the trash when I saw they were from
Visa and MasterCard. But at the last minute I opened the identical notices,
and learned that due to the merger between BankOne and JPMorgan Chase,
the interest rate on my balances would be going from merely outrageous
to astronomical. In addition, the cost of late fees and penalties would
now hover in the area of nothing-less-than-amazing.
the last eight years, the major card companies have increased the late
fees they impose on us from $10 or less, to $39. More recently, they
have been changing the terms of our accounts at a historically high
rate, invoking clauses from the fine print of the contract, that any
dummy could see with a strong enough magnifying glass, enabling them
to double or triple our interest rates without warning or explanation.
Heres a direct quote from the notices I mentioned We reserve
the right to change the terms at any time for any reason. And
by the way, theres a $15 fee for making a last minute payment
over the phone. Mind you, were talking Visa and MasterCard, not
Joes Easy Credit and Check Cashing.
more, under a system called Universal Default the card companies have
the right to track your payments on your other debt, and raise their
rates yet again should they discover youre consistently late paying
your utilities. In fact, Discover Card recently raised their interest
rate to 19.99 percent for a single late payment. Not only that, the
raise doesnt have to follow an event, they reserve the right to
look back 11 months for a late payment that could justify the increase.
Default was launched in the 1990s after a steep rise in bankruptcy filings
and stayed to become an industry standard. The credit card lobby got
congress to enact it so they could watch for signs of trouble and protect
themselves with preemptive action. In other words, they were handed
a legal right to either call the loan on your entire credit card balance,
or raise your rate to the level they deem appropriate.But in the words
of Gilbert and Sullivan, does the punishment fit the crime
indeed, is there a crime or was I asleep when they passed
legislation that said its all right to punish someone who might
rob a bank or kill her mother-in-law?
dont bother wondering why Federal bank regulators arent
revisiting Universal Default, to keep it from becoming an excuse for
usury. Consumer spending is what fuels Americas economic engine
and credit cards are what make it possible. Its what pulled this
country through the last economic downturn, to the tune of $2 trillion.
way it works:
typical household now has eight cards carrying about $7,500. Thats
about 85 million people the industry calls revolvers, because
they roll their balances over from month to month and never pay them
in full. Without them, credit card issuers would be like any other publicly
held company struggling to please their investors. But with hefty
finance charges, that accrue from the moment of the card swipe, the
industry is reaping record gains. Last year it was $2.5 billion a month
in profit before taxes. No wonder the industry refers to the revolvers
as the sweet spot. But it gets even more cynical. People
who pay their cards off in full each month are known as deadbeats, because
they only make 2 ½% a month on them from the merchants. Take
my word for it, compounded on an annualized basis thats some serious
good news is, theres been a surge in complaints and lawsuits and
even a warning from the primary regulator of national banks. But my
advice is 1) Dont hold your breath waiting for economic
justice. 2) Complain loud and complain often, to the bank
that issued your credit card, to Visa and Master Card directly, and
most important, to John (Jerry) Hawke, the Federal Comptroller of the
Currency. His purported mission is to insure a safe and sound and competitive
national banking system, but in actuality he has pushed through sweeping
new regulations to further preempt state law enforcement authority and
to nullify virtually all state laws for national banks and their subsidiaries.
3) Beg or borrow enough to pay down your cards, and then give
them the scissors treatment and be sure to hide the one that
you keep for emergencies.
of the Comptroller of the Currency (OCC) website:
Complaints about regulation: Regs.Comments@occ.treas.gov
is a freelance financial writer, specializing in institutional finance.
She and her husband use their credit cards for almost everything
from groceries and haircuts to lumber and hardware purchases
and pay them off completely (almost) every month.
articles are published in financial trade journals all over the world.
But dont bother to GOOGLE her, theyre all credited to the
executives who employ her. A former ad agency president and enthusiastic
participant of life on the New York fast track, she moved to Asheville
in 2002 with her sculptor husband, Robert Winkler. A mother of three,
a grandmother of four, and the author of three screenplays she is dealing
with her culture shock by writing a North/South novel under her own