Chuck Jaffe
BOSTON -- Lisa in Boston is at wit's end. A few years back, she consolidated all of her outstanding debts -- including her remaining student loans -- onto a low-rate credit card that promised a rate of roughly 5% for the life of the loan.
She has steadfastly paid the bill down, always on time, but seldom over the minimum because, she said, "I can't afford that much more than the minimum."
Recently, Lisa got a notice that Chase Card Services is raising her minimum monthly payment to 5% from 2%. That will raise the monthly amount due on her outstanding $14,000 balance from $280 per month to $700 per month -- enough to make Lisa tight on the rest of her bills.
Joe in Tulsa, Okla., is equally frustrated. He has worked hard over the years to pay off his credit card bills, but because his work in the oil business can sometimes be spotty, he has always wanted to have available credit to get him through the lean times. When Joe recently paid off the bill on his Bank of America card, his "reward" was a note informing him that the credit limit on his account was being reduced sharply.
These types of stories are legion nowadays. Consumers are feeling the squeeze as credit-card issuers dig in to survive tough economic times and prepare for new operating rules.
No credit due
Last week, this column looked at why the rules changes -- though a step in the right direction -- are not necessarily going to help consumers. What Lisa and Joe have in common is that they, like millions of consumers affected by their card issuers' new playbook, want to know what they can do about it. See story on new credit card rules.
In a word: Nothing.
When you feel like you have gotten the short end of the stick, or a raw deal, trying to negotiate with a credit-card issuer is a bit like dealing with the Internal Revenue Service, only without the IRS' charm. Arguing with a card issuer over the way they have treated you -- or mistreated you, more likely -- is like fighting City Hall or working with a nasty boss: resistance feels futile.
That's particularly true right now. With credit-card issuers feeling the pinch and narrowing credit lines or cutting off customers -- including many who have made timely payments and managed balances properly -- I went looking for the right way to handle complaints with credit-card issuers.
I started this search after hearing from many consumers after writing about the new law. The common lament was that if the card issuer has a cold -- and they do, which is why they are cutting risks, even though that means hurting good customers -- the consumer gets the flu.
"Card issuers just don't care right now," said Credit.com's Gerri Detweiler, author of "The Ultimate Credit Handbook."
"It used to be that you could use the threat of taking business elsewhere, but these days I think that some of the card issuers actually want that," she said "You can go up the chain of command when you don't get anywhere with customer service, then maybe find the name of an executive -- or the top executives -- in the annual report or on the company's Web site and write a letter and send documentation. In the past, that would help to resolve things, but today it's entirely possible that they'd ignore it and never bother to respond."
Complaining up the ladder from the customer service rep, going to investor relations (if you are a shareholder), writing the big boss, filing complaints with the Better Business Bureau or Federal Trade Commission all feel good, but they may not resolve the problems in the account.
"I advise people to write to the president of the company, the comptroller of the currency, and to write their senator or Congressional representative," said Linda Sherry of Consumer Action. "But I haven't been telling them that complaining that way will restore their minimum payment, or their larger credit limit."
Tight squeeze
One thing every consumer should recognize is that the lenders moves are sometimes made with ulterior motives. Lisa called Chase, for example, and was offered the chance to keep her minimum payment at 2% of the outstanding balance, so long as she agreed to an interest rate of roughly 8% instead of the lower rate she was promised for the life of the loan. And Joe quickly was offered the chance to have his credit limit restored or even raised -- but with a balance transfer deal.
Close the account, and you take an exposure off the books for the issuer -- they want that -- while hurting your own credit score (though someone with good credit will see their score bounce back quickly). Opt out of the term changes -- part of the new law that went into effect last week requires a card issuer to provide 45 days notice before altering terms, and allows the customer to say no to the changes -- and the lender will freeze the account. Your terms will stay the same until you pay off the debt, but the credit line is shut off.
And if you think the lender was hard to deal with as an active customer, try getting a fee waiver or complaint addressed when you have refused its terms and conditions and put the account on lockdown.
While President Obama's planned consumer protection agency for financial issues may help someday, the truth is that it may not be able to resolve the growing rift between card users and issuers. After all, government officials put the new rules in place, and it's already clear that they'll be of minimal help.
"With credit card relationships, there are a million shades of gray, and you'd like to say 'This is how to complain and win,' but you can't," said Greg McBride, senior financial analyst for BankRate.com. "Closing your account and taking business elsewhere is a great option, unless you are in the market for a car loan or mortgage in the next six months and you're afraid of torpedoing your credit score, or you're the guy who is worried about losing a job and who wants whatever credit line they can keep as a back-up plan."
McBride added: "You may not use the card very often or you may do everything right, but a seldom-used account or an account where there is a lot of available credit -- even when everything is paid on time -- represents a risk exposure to a card issuer, not an opportunity to boost their receivables. If you are not an opportunity, you're their risk; you may not see it that way, but that's the logic you are facing."
The easiest way to avoid the problem, of course, would be to pay off the debt. Only when you have zeroed the balance and can manage payments without running up debt anew can you deal with credit card issuers on your own terms, rather than theirs.
Copyright © 2009 MarketWatch, Inc.
BOSTON -- Lisa in Boston is at wit's end. A few years back, she consolidated all of her outstanding debts -- including her remaining student loans -- onto a low-rate credit card that promised a rate of roughly 5% for the life of the loan.
She has steadfastly paid the bill down, always on time, but seldom over the minimum because, she said, "I can't afford that much more than the minimum."
Recently, Lisa got a notice that Chase Card Services is raising her minimum monthly payment to 5% from 2%. That will raise the monthly amount due on her outstanding $14,000 balance from $280 per month to $700 per month -- enough to make Lisa tight on the rest of her bills.
Joe in Tulsa, Okla., is equally frustrated. He has worked hard over the years to pay off his credit card bills, but because his work in the oil business can sometimes be spotty, he has always wanted to have available credit to get him through the lean times. When Joe recently paid off the bill on his Bank of America card, his "reward" was a note informing him that the credit limit on his account was being reduced sharply.
These types of stories are legion nowadays. Consumers are feeling the squeeze as credit-card issuers dig in to survive tough economic times and prepare for new operating rules.
No credit due
Last week, this column looked at why the rules changes -- though a step in the right direction -- are not necessarily going to help consumers. What Lisa and Joe have in common is that they, like millions of consumers affected by their card issuers' new playbook, want to know what they can do about it. See story on new credit card rules.
In a word: Nothing.
When you feel like you have gotten the short end of the stick, or a raw deal, trying to negotiate with a credit-card issuer is a bit like dealing with the Internal Revenue Service, only without the IRS' charm. Arguing with a card issuer over the way they have treated you -- or mistreated you, more likely -- is like fighting City Hall or working with a nasty boss: resistance feels futile.
That's particularly true right now. With credit-card issuers feeling the pinch and narrowing credit lines or cutting off customers -- including many who have made timely payments and managed balances properly -- I went looking for the right way to handle complaints with credit-card issuers.
I started this search after hearing from many consumers after writing about the new law. The common lament was that if the card issuer has a cold -- and they do, which is why they are cutting risks, even though that means hurting good customers -- the consumer gets the flu.
"Card issuers just don't care right now," said Credit.com's Gerri Detweiler, author of "The Ultimate Credit Handbook."
"It used to be that you could use the threat of taking business elsewhere, but these days I think that some of the card issuers actually want that," she said "You can go up the chain of command when you don't get anywhere with customer service, then maybe find the name of an executive -- or the top executives -- in the annual report or on the company's Web site and write a letter and send documentation. In the past, that would help to resolve things, but today it's entirely possible that they'd ignore it and never bother to respond."
Complaining up the ladder from the customer service rep, going to investor relations (if you are a shareholder), writing the big boss, filing complaints with the Better Business Bureau or Federal Trade Commission all feel good, but they may not resolve the problems in the account.
"I advise people to write to the president of the company, the comptroller of the currency, and to write their senator or Congressional representative," said Linda Sherry of Consumer Action. "But I haven't been telling them that complaining that way will restore their minimum payment, or their larger credit limit."
Tight squeeze
One thing every consumer should recognize is that the lenders moves are sometimes made with ulterior motives. Lisa called Chase, for example, and was offered the chance to keep her minimum payment at 2% of the outstanding balance, so long as she agreed to an interest rate of roughly 8% instead of the lower rate she was promised for the life of the loan. And Joe quickly was offered the chance to have his credit limit restored or even raised -- but with a balance transfer deal.
Close the account, and you take an exposure off the books for the issuer -- they want that -- while hurting your own credit score (though someone with good credit will see their score bounce back quickly). Opt out of the term changes -- part of the new law that went into effect last week requires a card issuer to provide 45 days notice before altering terms, and allows the customer to say no to the changes -- and the lender will freeze the account. Your terms will stay the same until you pay off the debt, but the credit line is shut off.
And if you think the lender was hard to deal with as an active customer, try getting a fee waiver or complaint addressed when you have refused its terms and conditions and put the account on lockdown.
While President Obama's planned consumer protection agency for financial issues may help someday, the truth is that it may not be able to resolve the growing rift between card users and issuers. After all, government officials put the new rules in place, and it's already clear that they'll be of minimal help.
"With credit card relationships, there are a million shades of gray, and you'd like to say 'This is how to complain and win,' but you can't," said Greg McBride, senior financial analyst for BankRate.com. "Closing your account and taking business elsewhere is a great option, unless you are in the market for a car loan or mortgage in the next six months and you're afraid of torpedoing your credit score, or you're the guy who is worried about losing a job and who wants whatever credit line they can keep as a back-up plan."
McBride added: "You may not use the card very often or you may do everything right, but a seldom-used account or an account where there is a lot of available credit -- even when everything is paid on time -- represents a risk exposure to a card issuer, not an opportunity to boost their receivables. If you are not an opportunity, you're their risk; you may not see it that way, but that's the logic you are facing."
The easiest way to avoid the problem, of course, would be to pay off the debt. Only when you have zeroed the balance and can manage payments without running up debt anew can you deal with credit card issuers on your own terms, rather than theirs.
Copyright © 2009 MarketWatch, Inc.
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