Thompson Law Blog

What has your credit card company done for you lately?

If anything good has come out of the recent financial crisis, it’s the awareness that credit card companies don't play fair.  The credit card companies are a business and are out to make a profit, no one would fault them for that; however the current leaders in Washington have pulled the covers back to reveal unethical practices, tricky hierarchy payment schemes and just plain bad business practices!

If you're a candidate for bankruptcy and have credit card debt, you may be interested to learn a little more about the type of "business" these credit card companies are conducting with you:

1.      Undisclosed rates during application.  Have you ever bought something without seeing it?  Of course not, so why should getting a credit card be any different?  You may be a conscious consumer and carefully study rates of competing creditors in order to find a card that fits your needs.  You may fill out an application online or fill out an application and return by mail. Either way, you would expect to know the interest rate of the card, and your credit limit at the time you sign up.  Unfortunately, this doesn't always happen.  You may not even discover the issued rate of the card and your limit until the card shows up in the mail.  This can get especially risky when you are transferring balances.  Cards may advertise 0% offers for "up to" a certain amount of time, only to find out that once you've been approved for credit, you get the touted rate of 3 months, after which time your interest rate accrues at 22%.  

2.      Reporting “some” truth to the credit bureaus. Correcting misinformation on your credit report can be a hassle. In the scheme of things, the creditors hold seemingly limitless power in this regard. One trick of credit card companies is not to report your credit limit in which case the bureaus use the “highest balance charged”. It works like this: If you use $100 of a $1000 credit limit, then you’re only using 10% of your credit power and this is favorable. However, if no limit was reported by your credit card company then your credit limit registers as you using $100 out of $100 available, inaccurately showing you “maxed out.” This acts negatively towards your credit score.

3.      Raising the rate after 1 day late. Late payments can happen to the best of us. Payments get lost in the mail, computers glitch in online payment processing, or people just plain miss a payment. The credit card companies know the difference between an intentional non-payment (those of 30 days+ late) and an accidental goof. Regardless, these companies flex their power muscle and will take advantage of your mistake by raising your rate to double, or sometimes even triple your original APR.

You may have a sense of loyalty to your American Express, Discover, or VISA card because you’ve done business with them for 5, 10 or even 20 years. Perhaps this article will give you a different perspective.

You can track the proposed legislation at http://www.govtrack.us/congress/bill.xpd?bill=s111-392.

If you’re overwhelmed with credit card debt and you need to know your options, email us at melissaatthompsonlaw@gmail.com.