Saturday, April 25, 2009

Credit Cards

Bank of America spokeswoman Betty Riess says the bank looks at factors including "an individual's performance with us as well as external credit risk indicators" in deciding whether to raise rates. Consumers could see higher rates if they pay late or go over their credit limit twice in 12 months, she notes.

That's a statement from Bank of America on why your interest rate might be raised on your credit card. Small problem is that on the two accounts I have with Bank of America I've never been later EVER.

This comment about legislation under consideration in the House:

The American Bankers Association trade group, which represents the biggest credit card issuers, said it is concerned the House bill could reduce the availability of consumer credit and make it more expensive.

Let see raising rates by 50 to 100 percent or more isn't going to make things more expensive for consumers. You can read more about this from the Washington Post and USA Today. But of course it's not that they're raising rates across the board they use the wonderful euphemism of "reassess credit card risk." If that were indeed the case, then in some cases wouldn't people's rates be going down. But you don't hear about that at all.

The rates consumers pay on credit cards are tied to their risk, issuers say. If issuers can't raise rates on the consumers who become riskier, they'll have to pass along the costs to everyone, they say.

Adam Levitin, a law professor at Georgetown University, believes these arguments are "pure scare tactics."

"If bank rates go up after these regulations, it will not be because of the regulations, but because the banks see it as an opportunity to raise prices," Levitin says.

As far as I can see, they are passing the rates on to everyone. There is no reason to believe that all of a sudden this many people are at risk. The Banks see this as an opportunity to recoup their losses from all the bad loans they made.

The legislation going through Congress is way over due.

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