We sure all love our plastic! In today’s fast paced society the ability to conduct transactions on instant credit has transformed the way we do business and how we make most purchases. Utility aside, it doesn’t give Visa, Master Card, and AMEX the right to make their own rules and rip off their clients.
There are a few things that credit card companies in the US can get away with, that they can’t get away with here in Canada, that just boggle the mind. How some of this has stayed under the radar this long, can only be answered by closely inspecting the palms of senators for signs of GREASE!
Example 1:
1) Your credit card may say 11.9% and when you make your purchase you are fully, and reasonably, expecting that the price of carrying that item until it’s paid off will be %11.9. But how wrong and silly you would be in assuming that. Once the deadline to pay that purchase off expires, the credit card companies are free to raise their rates, to say 30%, on that balance, and they don’t even have to tell you. If fact, it’s nearly impossible to figure out exactly what interest rate you are actually being charged as the banks play with the rates depending on your credit score, your brand of toothpaste, and if you used clean socks this morning. For starters the US govn wants to impose a 45-day notice requirement, before jacking up someone’s rates.
The credit card companies’ defense is that they need to be able to price in risk accordingly. What a trully lame argument. You priced your credit risk when you evaluated the person’s credit at the time of application. Isn’t that what the application was process was supposed to be for? You are calculating your risk every time you increase a person’s credit, most times without being asked to do so. How does jacking up the rates on a consumer who was obviously unable to pay the purchase off, going to make it LESS risky? Dumb right?
Example 2:
2) If you made a $3′000 dollar purchase, and paid off $2′998 of those dollars off within the permitted period. Once the grace period expires, the credit card company can, and will, charge you interest on the entire $3′000, even if $2′998 of it was payed off from day one. This little secret applies to Canadian consumers as well, so be aware.
Example 3: This one is really criminal
3) Let’s say you bought something for $10′000, and had not finished paying it off. It has been a month now, and you went out and bought something else for $4′000. Once the grace period expires for the $10′000 dollar purchase Visa, Master Card, and AMEX, will jack up the rate you are paying for that purchase.
Let’s say it’s now two months later, and you still have both items on your credit card. The price of the $10′000 purchase has been increased to 30%, while the $4′000 is still at 12%. If you attempt to make make a $4′000 dollar payment, the credit card companies will channel the payment, at their discression, to the lowest interest bearing amount, so as to keep you paying 30% on $10′000, while you pay off your smaller debt at 12%.You can safely assume that anything else you put on that card, will be paid off before they let you pay a cent off the $10′000 that they are making such a killing on.
This sort of massaging of payments is in really bad faith, and keeps the higher interest on your credit for as long as possible.
There are more, but that’s a pretty good sampling of the more egregious ones. Lynch them all!
