card issuers
More consumers find credit card terms changed as issuers cite rising risk
Sweeping new federal rules aimed at banning controversial credit card practices don’t take effect until 2010.
But if you ask Jackie Jensen, card issuers are trying to throw in as many changes in account terms now before things tighten up.
The Rowlett resident and her husband, James, used a balance transfer offer on their Chase credit card that came with an annual percentage rate of 3.99 percent until the balance was paid off.
She was later shocked to discover that the minimum payment had soared from $116 a month to $288 a month.
Chase notified customers in December that it was raising the minimum card payment from 2 percent of the unpaid balance to 5 percent and was adding a $10 monthly fee that would start with the January billing cycle.
But the Jensens didn’t read the notice closely because of the holiday rush, she said.
“This was at the time that most firms send out their privacy notices, so we didn’t pay close attention to it and just filed it,” Jensen said. “During December, there’s also so much other mail with which to contend.”
She said that when she called Chase about the change, the customer service representative dangled another offer before her.
“If we agree to modify the interest rate to 7.99 percent fixed until January 2011, then they’ll allow our minimum payment to revert to the 2 percent that it has always been,” Jensen said. “In essence, they’ve got folks backed into a corner to extort agreement to this new deal.”
The Jensens begrudgingly accepted the higher interest rate. Jensen called Chase’s move “sneaky” and “underhanded.”
“By raising the minimum payment by over 150 percent on short notice, effective in January – when most folks are on a tight budget – they effectively force people to accept their alternate offer,” she said. “I believe their timing was deliberate – the timing of the mailing of the disclosure during Christmas rush and the effective date of the change.”
Chase officials said the change in terms that affected the Jensens will impact less than one-half of 1 percent of the company’s credit card accounts.
“Those who are impacted have carried large balances for over two years, while making little progress in paying them off,” said Stephanie Jacobson, spokeswoman for Chase Card Services. “We constantly evaluate the risks and costs of funding credit card loans. When necessary, we make changes to pricing, terms or credit lines based on borrower risk, market conditions and the costs to us of making loans.”
In today’s sick economy, those risk factors “take on added importance,” she said.
The skyrocketing unemployment rate is a huge factor, said Peter Garuccio, spokesman for the American Bankers Association.
“Banks/card issuers are reacting to broader forces,” he said. “The greatest single indicator of a customer’s ability to repay their debts is whether or not they have a job.”
So use your credit wisely and prudently.
“If you do anything to come across as somebody that is a greater credit risk, they’re going to increase your APR and/or cut your credit limit,” said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site.
Card issuers were taking those actions before federal banking regulators passed the tougher regulations on card practices in December, he said.
While that’s true, card issuers also have a wide-open window to implement new account terms before the tougher restrictions take effect in 2010.
“You can expect that they’re going to do as much as they can to generate revenue as much as they can,” said Curtis Arnold, founder of CardRatings.com, a credit card information Web site. “If they can slip one past you with a new fee, more than likely they’re going to try to do it.”
So read all notices that your card issuer sends you.
More consumers find credit card terms changed as issuers cite rising risk
From the Finance articles and news
15 important credit card terms to consider before buying a credit card!!
By Thomas Lindstrøm
A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost.
So it’s wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application. You also may want to ask about these terms when you’re shopping for a card.
If you don’t understand the language, credit card offers and statements could lead you to deep debt — or at least furious frustration. For the big scoop on the fine print, here’s what these frequently used credit card terms mean.
1.Average daily balance — This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day’s balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card’s monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50.
2.APR(Annual percentage rate) — A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans.
3.Balance transfer — The process of moving an unpaid credit card debt from one issuer to another. Card issuers sometimes offer teaser rates to encourage balance transfers coming in and balance-transfer fees to discourage them from going out.
4.Cash-advance fee — A charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: “2%/$10″. This means that the cash advance fee will be the greater of 2 percent of the cash advance amount or $10.
The banks may limit the amount that can be charged to a specific dollar amount. Depending on the bank issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill as of the day you received the advance. The cost of a cash advance is also higher because there generally is no grace period. Interest accrues from the moment the money is withdrawn.
5.Card holder agreement — The written statement that gives the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, and the cardholder’s rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer. Rules for imposing changes vary from state to state, but the rules that apply are those of the home state of the issuing bank, not the home state of the cardholder.
6.Finance charge — The charge for using a credit card, comprised of interest costs and other fees.
7.Floor — The minimum rate possible on a variable-rate loan or line of credit, after any initial introductory rate period. For example, on a credit card with the Prime rate as its index, no matter how low the Prime rate drops, the rate on the line may never decrease below the stated rate floor.
8.Free Period — Also called a “grace period,” a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you’ll have enough time to pay.
9.Minimum payment — The minimum amount a cardholder can pay to keep the account from going into default. Some card issuers will set a high minimum if they are uncertain of the cardholder’s ability to pay. Most card issuers require a minimum payment of two percent of the outstanding balance.
10.Over-the-limit fee — A fee charged for exceeding the credit limit on the card.
11.Periodic rate — The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.
12.Pre-approved — A credit card offer with “pre-approved” only means that a potential customer has passed a preliminary credit-information screening. A credit card company can spurn the customers it invited with “pre-approved” junk mail if it doesn’t like the applicant’s credit rating.
13.Secured card — A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
14.Teaser rate — Often called the introductory rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders.
15.Variable interest rate — Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.
I hope this terms will help you out a little when choosing your next credit card.
Originally posted article: 15 important credit card terms to consider before buying a credit card!!
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15 important credit card terms to consider before buying a credit card!!
From the Finance articles and news