Credit cards have developed into very complicated financial products. As a result, even if they printed the disclosure in 18 point type, you wouldn’t know what was going to hit you from behind. I have been trying to get out of debt recently, so I’ve been studying the issue. I am now doubling my dose of blood pressure medication and tranquilizers, and practicing yoga so often that I can no longer be gainfully employed. You will need to know what I’ve found out about banks and credit card companies, especially if you are not making them the focus of your life.
1. You cannot close a credit card account. I paid off a balance to Citibank because they had raised my interest from 0%, which I had signed up for, to 29.9% because my payment was one day late due to Wells Fargo’s automated bill pay and the US mail. I asked to close the account. I got the following:
Dear FrancineHardaway: We recently received a request to close your Citi Platinum Select Mastercard account. For your protection, your account has been permanently closed. The closed account cannot be reopened. Please destroy all cards with this account number by cutting the cards in half. A new account number has been assigned to you, and a replacement card will be mailed to you the next business day.
Never mind that I didn’t ask for a replacement card.
2. The card companies don’t want you to pay off the principal. There’s something called a “sweat box” business model for credit cards now. The companies don’t want the principal back. They want the fees. They want to keep the consumer paying.
3. Reforms won’t work because the credit card companies will find a way around them. Every previous effort at reform has just unleashed further ingenuity.
4. Card issuers can make a profit because the interest rates and fees will be so high that they will offset loss of the principal. This is predatory lending: lending with conscious disregard for the consumer’s ability to pay.
5. If you pay too much, they get nervous. In the same mail, I got this notice:
We want to be your number one credit card. We noticed that you recently made a large payment to your Starbucks Card Duetto Visa account and want to make sure we’re not losing your business. That’s why we want to remind you again of these low-rate reasons to stay –it’s our way of showing you that your business is important to us. Enjoy APR’s as low as 0% with check numbers 2993 and 2994. 2.99% APR for 24 billing cycles with check numbers 2995, 2996, 2997. (BTW, there’s a 3% transaction fee to do any of this, and a billing cycle may no longer be a month.)
6.The interest rate on the card does not tell you what the total cost of revolving a balance on a card will be. There are late fees, over-limit fees, annual fees, foreign transaction fees, interchange fees that are charged to the merchant and passed through to the consumer.
7. Convenience checks are subject to the cash advance fee.
8. The new thing is double cycle billing: The balance on which interest accrues is not the balance on this billing cycle, but on this one and the previous one. And if you are late on another card, or perhaps your cable bill, your credit card interest rate will go up. And perhaps your car insurance.
9. There are tricks about when a payment is posted. After 2 PM might count as the next day, and you may pay interest.
10. And then, all this can influence your mortgage refinance or loan modification.
Aurora Loan Services has carefully reviewed your loan for home retention options. Aurora has determined that we are unable to continue pursuit of said options. A home retention workout on your loan has been denied for the following reason(s): Your finances indicate an inability to afford the monthly payments.
Never mind that I am current on every single payment, mortgage or credit card, despite being over $150,000 “under water” on my home. I have no equity and could have “walked” a year ago, but didn’t.
Notice the reinforcement I get for trying to stick with my home payments and pay down my debt, the Suze Orman recommendation.
Take a lesson. The banks own the government, and me, and you. I am finished with them. I am going to get out of debt asap and put my money under a mattress, where at least it somebody eats it, it will be Buppy the Puppy.