Friday, August 28, 2009

Loan Shark Rates on Credit Cards

Some time ago, while Congress was considering legislation to help credit card holders, I wrote my representatives asking them to make sure the legislation addressed limits on what I consider to be "loan shark" rates charged by credit card companies. Unfortunately, no such provisions were included in the bill signed into law by the President (Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009).

This last week, I got the required notice from Citi, who is the backer of my Sears card, announcing rate hikes and informing me how I could opt out (which basically means, if you want to opt out, they cancel your card). Even though I have an excellent credit rating, the notice said,
"We are increasing your variable APR for regular Sears and External purchases. Your regular Sears and regular External purchases Annual Percentage rate will equal the U.S. Prime Rate plus 21.99%. As of July 1, 2009, this APR is 25.24%. This APR equals a daily periodic rate of 0.06692%.

We are increasing your variable APR for cash access. Your cash access Annual percentage rate will equal the U.S. Prime Rate plus 23.90%. As of July 1, 2009, this APR is 27.15%. This APR equals a daily periodic rate of 0.0744%.

We are increasing the transaction fee for cash access ... You make a cash access transaction if you use a cash access convenience check; get money through an automated teller machine (ATM); or get money through home banking or a financial institution. You also make a cash access transaction if you make a wire transfer, buy a money order, traveler's check, lottery ticket, casino chip or similar item; or engage in a similar transaction. For each cash access transaction we add a transaction fee finance charge of 5% of the amount of the cash access transaction, but not less than $5.

We are increasing the Transaction Fee for Balance Transfers ... You make a balance transfer if you use a balance transfer convenience check or contact us to transfer a balance. For each balance transfer, we add a transaction fee finance charge of 5% of the amount of the balance transfer but not less than $10."

Good grief … you’d think it was enough that they are going to charge 27.15% interest without having to also charge an additional 5% transaction fee up front. What’s wrong with them? I called their customer service number and immediately cancelled the credit card, which incidentally had a ZERO balance.

So ... what was achieved by the "CARD" legislation is that they now speak clear English in their notice of change in terms, but they continue to increase their loan shark interest rates to obscene levels.

I'm lucky that I could cancel my card and refuse anything to do with their loan shark rates, but others across our nation are not so fortunate. At least they can cancel their card and continue to pay off their existing balance at their then-current rate. I wonder how many people will never be able to pay off their balances, or be forced into bankruptcy through the greed of these financial institutions.

The interest charged to lending institutions is and has been, for quite some time, at an all time low. Yet, financial institutions are continuing to rape customers with all-time-high interest rates. When is President Obama going to ask Congress to take action related to placing reasonable limits on interest rates charged by credit card institutions?

1 comment:

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