Credit Card Companies Respond to New Legislation by Raising Rates

When I heard on NPR that President Obama's administration was going to be cracking down on credit card companies' usurious practices, I felt, well, smug. "That'll show 'em", I thought. This story was of particular interest to my husband and myself, because combined, we owe around (number edited to protect sanity of author). Suffice it to say that to us, it's a lot. Under the new law, it will be a lot tougher for credit card companies to raise rates, and also to keep debtors paying outrageous interest rates for cash withdrawals.

We have two credit cards, one through Citibank, and one through First National Bank. Citibank has behaved admirably during these times; my rate has remained steadily at 11%. Ah, I remember the days when that was actually considered high. The problem comes in with the First National Bank card, and suffice it to say, I am absolutely outraged. We have had this card for about seven years, and have never made a late payment. As of December 2009, our interest rate was 13%. Now, for no apparent reason unless in response to the government's new legislation, it is 20%. At this rate, way over half our monthly payment is interest charges, and it will currently take us seven years to pay this card off, as opposed to three years under the old rate.

In the past six months I have had three conversations with representatives from First National Bank. The first was a discussion back in August or September in which I lowered my interest rate. Yes, there was a time when you could simply call your credit card company and explain that you were a poor student struggling to pay your bills, and since you were a loyal, valued customer, the company would lower your rates to make things easier for you. To me it seemed like a win-win situation. The consumer could pay her bills, and the merchant would get his money. The representative also advised me to call back a month later, which I did, and get the rate lowered again. This got my interest rate down to 13%, and I thought if the rate was going to change, it would only be for the better.

Boy, was I wrong. Starting in December of last year, I got a rapid series of letters in small print advising that our interest rate was rising, from 13%, to 16%, to 17%, to the current rate of 20%, with cash advance withdrawals at a whopping 25%. And believe me, we will be paying that unfortunate and ill-advised $300 cash withdrawal for a long, long time. In the last conversation I had with a Citicard rep, she told me there was absolutely no way she could lower my rate; apparently that power has been taken away from the average representative.

So First National Bank will get their pound of flesh after all....which reminds me of the days when exorbitant interest rates used to be punishable by bodily infliction. Now nameless, faceless corporations can actually practice usury, and nothing can be done about it. Of course one can refuse the interest hikes, but that will close his account, and deduct up to 100 points off his credit score.

Although Obama's reform is supposed to help the credit card consumer, many card companies are attempting to make a rapid profit off hardworking people who have made most or all of their payments on time. And the only action we can take is to discontinue using the card, pay the bill, and look forward to the satisfaction of closing the account...in at least seven years.