When a credit card company doubles (okay, increases) a customer’s interest rate, the companys generously offer the customer the option to opt out by paying the balance in full. Don’t cardholders have that right anyway, regardless of the company’s rules? Haven’t they always?
The credit card company is simply trying to distract from the rising interest rate by making the customer think he is being offered something rather than being screwed.
You should also be given the opportunity to opt out by stopping using the card, in which case you can continue paying the balance under the old terms. We’ve done this with one card. If you do opt out, either this means the card is “closed” (can’t be used any more), or you tacitly agree that if you DO use it again, you’ve un-opted (i.e. agreed to the terms). Someone posted a vent here a few months ago about THAT practice on his Bank of America card.
I don’t know, I don’t have that kind of credit card debt and my balances are small. I haven’t read the new laws, so all I know is what I see in their commercials.
This isn’t because I’m any kind of money manager, it’s because I’m a senior and I no longer need to use cards for large purchases.
Whenever I’ve had the rate put up, the “opt out” has been as Mama Zappa said - the card is stopped so it cannot be used for new purchases, but you keep paying at the old rate until the balance is cleared.
Well sure, but so what? If they could readily pay the balance in full, they almost certainly would have done so already. All the company is doing here is “generously” allowing the cardholder to do without the card.
Actually, the credit card issuer only has to offer you the ability to pay their balance in full to get out of the rate increase. I don’t know of a single company that actually will allow the user to stop using the card in order to get the lower rate.
I personally believe that a credit card company shouldn’t be allowed to charge a higher interest rate on any preexisting balance. The way I look at it, you made a purchase with an idea of what the current interest rate would be. I might buy something if I knew the interest rate would be 12% but not if it was 25%. And, the credit card provider also agreed to this interest rate. Changing the interest rate from 12% to 25% on items I purchased when the interest rate was 12% seems to be breaking my implied contract.
Imagine if you bought a car and the bank where you got the loan said “We decided you’re actually a bigger credit risk than we originally thought. We’re changing the auto loan from 12% to 25%. And, if you can’t afford the payments, tough noogies!”.
Of course, in an auto loan I could get out of it by forfeiting the car back to the bank. But, you can’t do that with credit card debt. There’s no out. The bank will simply keep upping the interest rate and get you deeper and deeper in debt, and there’s no way to end it. You could try to declare bankruptcy, but Congress decided to make that option almost impossible to get. (Your government at work!)
It’s absolutely unfair that they can change the interest rate on existing balances. I thought the CARD Act was supposed to change that, but it’s unclear to me whether that was included in the final bill.
That’s the law I mentioned above. There’s no way I’ll understand the actual bill, so I’m going to try to find a good explanation of it somewhere.
I’m open to suggestions.
Here’s what my new terms are that I got a few weeks ago:
So it seems to me that you might be able to both use your card and or pay it off just like you do now. I don’t know what would happen if you had bills left at the end of your membership.
So even if I have an unpaid balance I can continue to pay it off after they close the account. Now I know for a fact I’ll be closing it as I thought it was being raised to 25%, but that’s my minimum.
In the past, I’ve had credit card companies increase their interest rate, and had the option to opt-out; I notified the company, stopped using the card, and paid the balance off under the original terms.
I’ve seen indications that this might not always be an option. And most recently, many banks have increased the minimum payment, as much as quadrupling the minimum payment. According to those banks, consumers cannot opt out of that change in terms. If the consumer cannot pay the larger minimum, default (late payment or no payment) will usually trigger an increase in the rate.