THOSE DARN CREDIT CARD COMPANIES ARE STILL AT IT!

Today's culprit is Bank of America. B of A recently raised credit card interest rates on over 4 million customers. Their target profile was an excellent borrower. The borrower that pays the minimum payment due, on time, every month like clockwork, not those in default. WHY?

I recently heard from a gal that had her B of A interest rate tripled. Her credit card payment history was perfect. For the past five years she has been making her minimum payment on her balance and never late. What the credit card company saw was "easy money". All they had to do was raise the interest rate on her account and they make more money. What a great idea - for them! 

There's even a term used for this practice,  "Chasing the Balance". This term is used when the credit card companies raise your interest rate and cut, even slash your credit limit plus decreasing the time on your payment due dates. The result for the CC companies is viewed as fantastic. The customer is now paying a higher interest and is unable to charge more without going over their limit. They have you boxed in.

But what happens to the customer? The impact on your credit scores is tremendous. In the past I explained the debt to available credit ratio (which is much like debt to income ratios). Both of these ratios are now sent into a tail spin. That poor gal's credit card is now maxed out so her debt to available credit is almost zero and her payment is higher raising her debt to income ratio. She is caught by both and her credit score takes a huge dive. And the worst is not over. This credit card company "Chasing the Balance" get rich quick technique now shows on her credit report so all the other creditors do the same thing. Wow - talk about catch 22.

It will be just over a year until the new credit card company rules (see prior blog) will kick in so please watch each and every letter you are sent by your creditors. If this happens to you, call me for consultation. Your particular case may be worth fighting.

Remedies you may want to try - to replace the lost debt to credit ratio include:  opening another card, roll all or a portion of your balance to another card, take cards from local Credit Unions and not big world wide banks and call them, ask for a rate reduction.

Questions and comments are encouraged. We are here to help you save money and teach you how to do it.
www.minocquamortgage.com and marcia@minocquamortgage.com