Annoying games the Credit Card companies play

Like many Americans, I have too much credit card debt. At least I’m lucky in that I have a job that pays well and still have that job (knock on wood) and I can afford to pay down my debt.

As background, I have three cards, only one of which I normally use for anything anymore. I’ve been paying off the other two, but I do need to keep one card open for business travel. My company reimburses me for the travel after I submit an expense report and receipts. This card has a relatively low rate and a consistent balance, and I use it for travel since they are good about not adding fees or screwing me on exchange rates for foreign travel.

Of the other two cards, both had pretty high balances, but one is now almost paid off and I should close that card out in the next few months. The other I’ll discuss in a bit.

But yesterday I decided to get my kids a couple of computers for birthday/Christmas stuff, and ordered a couple of computers from HP, a laptop and desktop. I put it on my travel card, which was probably a bit of a mistake, but I have enough available credit on the card to comfortably fit both and still have room for my travel expenses for the next two weeks. As a side note, my expenses are normally in the $1000/week range, and I pay that back immediately, plus some, and have been inching down the overall balance on this card as well.

Anyway, this morning I got a note from HP saying that the Order was rejected because of the Credit Card, so I went on and checked the balance. It was the same as before, but the CC company lowered my available credit between November 11th (last statement) and yesterday to be equal to the current balance. What’s more strange about this is that they just sent me, two days ago, one of those “here, take some more credit with these convenient checks” junk mails. So, on one hand, they want me to rack up more debt, but on the other, they don’t. I guess it’s fair, they’re the boss, they can do what they want, but I find it annoying. No notification about that either. Just suddenly went from $3,142 available credit to zero (and now that I look again, I have $133 available credit). Weird.

So I go and check my other credit card to see if there’s been any interesting changes there. Nothing, but then I finally took a close look at how they charge interest.

This card has a fairly high balance. Some of it is from some promotional thing that they had at a low interest rate, some is on a cash advance at a very high interest rate, and some is on just normal stuff at a normal interest rate. The balance is split out like this, roughly:

Normal charges/interest: 60% of balance 12% interest
Cash Adv/high interest: 15% of balance 20% interest
Promotion/low interest: 25% of balance 6% interest

Of course that has evolved a bit over time, mostly due to how the CC company charges things. Being a dummy, I just noticed (although I sort of suspected) that when I make my monthly payments, NONE of the principal goes against the Cash Advance or normal charges - all of it goes against the balance on the promotional rate. Again, I guess this is fair (or at least legal). What I also never noticed is that the interest on the Cash Advance is applied to the balance on the Cash Advance so that the value of the Cash Advance has steadily climbed over time. Which is then charge again at the higher rate - oh, the magic of compounding!

Net, I guess I have to get my ass in gear and pay this one off before that Cash Advance interest kills me.

Lowering credit limits is par for the norm, now.

Be especially careful on balance transfers. I had a rate with Bank of America, that was expiring. 5/3 Bank offered me one free year and only $25 transfer fee. This is a much better deal

So I transfered the balance, and BoA immediately cancelled the card. Now I have been with BoA for over 10 years, I could’ve easily demanded a lower interest rate when this one expired and gotten it.

This would’ve left my 5/3 card open for any emergencies. OK I got a better deal with 5/3 but it’s a nice feeling to have some back up.

I hate to say it but I lost all sympathy for banks, no matter what you do they find a way to nickel and dime you and to get around the laws.

Now this isn’t to say they’re doing anything illegal, they aren’t, but they’re violating the intent of the new consumer laws.

It’s like going to a June White sale and finding out June White died and they’re sellig her stuff.


Nice one.

I put this out here to be cautionary to other as much as anything else. As I mentioned, although I don’t like it I can deal with it. Others I could see this kind of stuff putting them underwater.

Its obvious why the credit card companies are doing this now, but I think they are being short-sighted. The only thing they are doing is teaching their customers to be more vigilant of changes to their credit and to distrust the credit card companies. When the economy rebounds, as it may or may not already be doing, the credit card companies are going to want people to run up balances on those cards in order to collect that lovely lucrative interest. What they may find is many people no longer trust those companies anymore and pay off their bills regularly.

Let’s hope so; it’s better for us all in the long run.

Not anymore, at least as of this February. The CARD Act will require companies to apply payments to the highest interest rate balances going forward.

Sweet, then I can wipe out that high interest stuff in a couple of payments, three or four, max.

Around six years ago I took a $500 cash advance on my card. (I know, but it was the only choice at the time.)

I still have a cash advance balance. Now, granted, it’s twenty-seven cents, but by GOD the credit card company will not pay it off so they can get their twelve cents of interest on that outstanding twenty-seven cent balance!

My primary credit card company (Citibank, if anyone cares), just sent me a notice that, when the card renews in 2011, the interest rate will be going up to something like 28%. It’s the one card that I carry a balance on a couple of times a year, just to be sure that we keep our credit score high (it’s usually around 780). Most of the year I pay the entire balance at the end of each billing cycle, so apparently we’re one of those customers Citibank has decided they want to jettison; they’re not making enough money off of us. They’ve also pulled the stunt where they move the due date forward by a couple of days every so often, just so we make a late payment and they can charge a late fee and interest. I’m hip to that one now and am much more diligent about verifying the due date.

At first I thought, “What the hell? I’m taking my business elsewhere!” but I think now I’ve decided to be a pain in their ass for as long as I possibly can. I’ll move my periodic-balance-carryover scheme to a credit card with a lower interest rate, scrupulously watch the due dates, and basically force Citibank to flat-out drop me if they don’t want my business.

I know, I know, I’m not much more than a fly-speck in their overall business, but I’m going to take these vindictive little victories wherever I can get them.

What makes you think that keeping a balance once or twice a year will help your FICO score? I’ve paid off my balance every single month since I got married to a finance guy (who refuses to pay interest on cc’s) 20 years ago. My credit score is 807.

I don’t know if that’s true or not (will double-check) but I did read that it would require them to apply any extra payments - above the minimum - to the highest rate first. So if your minimum is 50 bucks and you have some charges at 5% and some at 15%, you pay 200 bucks… 50 goes to the 5% balance and 150 goes to the 15% balance.

It’s a nice little sneaky-bastard game they’ve been pulling. My workaround, when I’ve had a promotional-rate balance, was to put aside that particular card until the balance was paid.

Which now that we think about it… was about 3 weeks ago, and it was a Bank of America card… and I paid it off by a zero-cost balance transfer when the promotional rate died… so we’ll see if BofA nukes my card now. I might make and pay off a 10 dollar purchase just to keep it open - I’ve already declined their rate increase, but I’m thinking of credit utilization percentages / length of account / FICO score now.

Cite for the above - scroll down to payment allocation and fees

You’re right, my statement was imprecise.

I suspect that at this point in our lives it doesn’t make a difference, but at one point in time I was told (I know, I know, this isn’t even up to the level of anecdote) that never carrying a balance can make one unattractive to certain lenders; I assume the notion being that they won’t make any money off of you on interest payments and the like. Now that I think about it, that was probably back before I had a mortgage and car loan, so credit cards were probably my only source of credit rating information.

I’m not sure that matters either. I had a healthy balance on my CitiCard and they raised my interest rate too. I say had because I’ve paid 2/3 of it off and hope to have the rest paid off in a couple of months. A pox on them.

Anyone want to speculate on how all these changes will affect their bottom lines, in the next couple of years?

In no particular order:

[li]Increased profits due to higher rates instituted now[/li][li]Increased profits due to annual fees[/li][li]Better cash flow due to higher minimum payments[/li][li]Decreased profits due to more people saying fuckit and paying down faster, or switching to cash or another provider[/li][li]Decreased profits due to more people defaulting because they can’t afford the higher rates[/li][li]Decreased profits due to more people defaulting because they can’t swing the higher minimum payments[/li][li]Decreased interest income because people who’ve been hit by rate/fee/minimum changes switch to other cards[/li][li]Increased profits from those who can’t or won’t (for whatever reason) switch to another bank[/li][li]Decreased profits from the most responsible customers (the ones who use and pay in full) because they’ve said fuckit and switched, so there are no transaction fees coming in[/li][li]Stable profits from those same most responsible customers because they say “fuckit, I don’t pay interest anyway so who cares what the rate is”[/li][li]Increased profits because people will be more careful and only charge what they really can afford to pay off (yeah right!)[/li][/ul]

Am I forgetting anything?

Anyway - I sort of wonder if in the long run, there’ll be any real net change in their profitability.