Credit card companies seem to thrive despite terrible PR

Posted on | February 16, 2009 | 1 Comment

It’s the seductive nature of credit, I guess, that leads so many Americans into debt, and gives a bully pulpit to the Dave Ramseys and the Suze Ormans of the world. But, really, how do credit card companies get away with it? Great lobbyists, I suppose, and the (now seemingly passe) spend/buy U.S. culture.

Full disclosure – I learned a hard lesson just this past week. Spaced a payment on a sweet, sweet balance transfer deal, and as a result got hit with a huge interest rate jump. A moment of inattention, and it cost me dearly.

So I was none too happy to see David Lazarus rub it in with warnings that such happenings might just be the beginning: http://www.latimes.com/business/la-fi-lazarus15-2009feb15,0,1994750.column.

In these increasingly desperate times for some when it comes to the economic front, the big banks — Citibank, Bank of America Corp., Wells Fargo & Co. and American Express Co. — threaten rates can go up to 30 percent for missing a single payment. He notes that “JPMorgan Chase & Co., the nation’s largest issuer of plastic, has begun charging hundreds of thousands of cardholders a $10 monthly fee for having carried large balances for more than a couple years.”

So, with banks having blown the housing boom and incurred massive losses, they are turning to the already debt-ridden American consumer to carry part of the burden. “Gouging” customers to boost their bottom lines, according to Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.). This, just as consumers are in more dire straights than in any time in recent memory.

Clark Howard has a similar message on CNN.com – http://www.cnn.com/2009/LIVING/personal/02/13/clark.howard.credit.cards/index.html.

The good news is that new rules are coming that will stop banks from retroactively raising rates on existing balances – but they won’t go into effect until July 2010, and the banks will no doubt lobby to get the pending legislation overturned.

Clark: “the problem with banks jacking up the rates is that they’re making it tougher for someone who might have been able to pay at 5 percent but could never pay at 30 percent, for example. So they’re setting you up for failure, and they’re shooting themselves in the foot at the same time.”

Bottom line, as always — pay down your debt, and try to pay it off altogether. Easier said than done in ideal circumstances, let alone in today’s challenging times.

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