Scenario- I have a Chase Bank issued Amazon Visa with a 9.99% rate. I have used it for almost 8 years now and it credits 1% of purchases towards an Amazon coupon you can use for anything on amazon.com. I typically carry a fairly hefty balance and usually wind up paying credit card interest costs of 1500 - 2000 annually. I pay on time, credit’s golden, no lates ever.
I got a letter from Chase recently jumping the rate to 14 %, so I call through the list of the various credit cards I have (but are unused) and find a considerably better deal on one of my older unused cards. I transfer my balance, and put the Amazon card away in the unused card file.
Now Chase Bank has just lost 1500 to 2000 annually and the fact that they would lose that income was (IMO) fairly predictable with a high degree of certainty. It seems to be a borderline crazy business decision to bump the rate substantially on someone with a decent credit rating who can easily move their balance elsewhere. Now (it appears) what they will have left is a higher concentration of people in more desperate situations who can’t move their balances because they are greater credit risks, and are more likely default on their cards. It’s almost cherry picking in reverse.
Nope. People who have high balances on their card are rarely able to move the balances elsewhere at a lower rate than 14%. (9.99% cards are becoming very hard to find even for people with 800+ FICO scores.) Fewer still will bother.
Why now? New rules limiting credit card companies are coming into play soon, and they’re just getting all the evil out of the way before the new rules take effect. (i.e. it will soon be very, very hard for them to raise the rate unilaterally on a card with no defaults…so they’re doing it preemptively).
Or conversely, it’s going to be harder for them to make money ripping off suckers under the new rules, so they have to make more profit from everyone else.
Every policy might work in some instances and not in others, and the idea is for it to work out overall, not in every specific instance. If they keep only 2/3 of the cardholders under a rate that’s 50% higher, they break even (on interest charges), and anything over that is profit.
Also, remember that Chase has to pay Amazon something for the premium that they then pass on to you, and that premium eats away at their margins. One way to get you to pay for that premium is to hike up your rate. As stated above, CC companies need to raise rates now since it will be much harder later. If they lose a few loyal customers in the process so be it…
Chase and many company are now putting no cap limits on transfers. For instance, I used to be able to transer my balances TO Chase at a cheap rate and they would say “fee of 3% or max of $75.00” applies. So if I transfered $10,000 the would only be $75.00. Now Chase says (at least for me) a fee applies of 3% regardless. So if I transferred a balance now I’d have to pay $300.00
CC will do much what they want. I have a year old dispute with Citibank. I sent them a payment for $75.00. They say they never received it. I have the CANCELLED CHECK, that says the bank, the day, the amount and time they deposited it.
Citibanks says “We have no deposit in our account.” My bank says “We deposited it, there’s your proof the cancelled check.” Citibank says “No such deposit exist.” I actually have sent them a copy of the cancelled check. They said “No record of a deposit exists.”
Short of suing them, which is too costly for me now, I’ll just aborb the loss till I can do something legal about it.
The answer really boils down to one thing – Chase doesn’t want your 9.99% APR. It doesn’t matter if you’re a good customer, bad customer or anything else. They don’t want to carry you at that interest rate.
Don’t take it personally, they just don’t think the amount of business you do with them at that level of profit is worth it.
Sometimes (not necessarily in this case), it can be a sign that All Is Not Well at the bank- hiking the interest rate means a)more income from interest payments and b)income from accounts settled in full by being transferred elsewhere.
At best, both of those things can only provide a short-term boost to income, but in a crisis (which as I say, may not be the case here), short-term, desperate solutions are not uncommon.
You just sent them a big chunk of cash. That’s what they’re after. Short term cash flow. They can now spin that money back out into an account that pays 19% and they didn’t have to take on additional debt to do it.
This. Basically, if you think your bank is servicing YOU, you’re looking through the wrong end of the telescope. They’re using YOUR money and YOUR financial obligations (interest and fees on credit cards, bank accounts, and CDs) to service their shareholders.
Because of all the bank failures/mergers in the past few years, I’ve ended up holding four Chase credit cards. I noticed this spring that Chase has apparently decided to really, really suck. I’m also an excellent customer with great credit, but they’ve raised the interest rate on all the cards to the point that I’ve completely stopped using every one of them and I’ve gotten cards from banks that seem a little less interested in screwing their customers.
I’m a little afraid to close the accounts, though. Because of the aforementioned mergers, if I close all my Chase accounts, I’ll end up losing about half of my available credit, and I don’t want to take that hit on my credit score.
Not to cloud this issue with unnecessary facts, but this has been the law since 2003. Credit card companies were given a long window since then to implement these changes due to how disruptive they can be for individuals. I am not defending Chase’s particular practices, but this is really nothing new.