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credit rate hike

So I got a mail from Chase.. one of those pamplet looking mails, that I almost threw away but decide to open. They were raising my interest rates.. from 6.25 to 10.99%. Not because I was delinquent but because of economic reasons. And the only way to opt out of the raised interest was if I mailed them a letter by a certain date. So I did, but they will also end up closing the account.

There's a bill that will prevent this (raising rates for customers in good standing) that hopefully will pass congress.

Grr. Makes me mad. Stupid credit cards. Stupid economy. Get better already!

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( 13 comments — Leave a comment )
moonwick
Jan. 21st, 2009 07:58 pm (UTC)
Tell Chase to take a hike. They're one of the banks that led us into this mess.
ripresa
Jan. 21st, 2009 08:09 pm (UTC)
Yeah, I don't think I have a choice. Either accept the rate hike... or they will close the account, and I pay the remaining balance at 6.25%.
It's a good idea to close the account anyways.
medryn
Jan. 21st, 2009 08:24 pm (UTC)
Wait, you have debt at 6.25% and you also have money invested in the stock market? Since stock market gains are taxed, you'd need to get something like an 8% return to make investing a better idea than just paying off the debt. Why not just liquidate your stock positions and pay off your debt?
ripresa
Jan. 21st, 2009 08:41 pm (UTC)
I think I've posted on this credit card topic before.
Basically it comes down to psychological reasons. I actually have enough money in my cash savings to just pay off all my credit card debt, without liquidating my investments.

I think I fear that if I do pay it all off, I will just create that much debt all over again.
medryn
Jan. 21st, 2009 08:44 pm (UTC)
I should think you could trust yourself to behave rationally :-)
ripresa
Jan. 21st, 2009 08:50 pm (UTC)
Phew.
I think Andy would let you know that I'm not the most rational person around :)

But yeah, I should get rid of my credit card debt..
dnivie
Jan. 22nd, 2009 07:44 am (UTC)
tax
Is that actually true ? I don't know the US tax-system well enough to say for sure.

Here the required returns would be simply 6.25% because though the gains in the market are taxes, the interest you pay on credit lead to a tax-decrease, and the two balance out.

(concretely, you pay 28% of your financial gains in taxes, but on the other hand you can also subtract 28% of your financial losses from taxes.)
medryn
Jan. 22nd, 2009 02:29 pm (UTC)
Re: tax
Interest paid on credit cards is not tax-deductible. As opposed to interest paid on a mortgage or on a student loan, which often is.
nekomouser
Jan. 21st, 2009 08:25 pm (UTC)
Good for you.

They try to raise my rates all the time and i just call their bluff. I call up and say "put it back where it was or cancel the account immediately." I've not had one say no yet.

I think they just count on people not paying attention.
(Deleted comment)
huscarl105
Jan. 21st, 2009 10:40 pm (UTC)
That happened to me recently, that one went to the top of the pay off list before the rate actually went up, its now striclty a pay as I go card.

The Federal Reserve has already passed several reforms http://www.doughroller.net/credit-cards/federal-reserve-approves-sweeping-credit-card-reform/

sadly they don't take effect until July 2010 so expect many shenanigans from the card banks until then.
dnivie
Jan. 22nd, 2009 07:42 am (UTC)
No sense
That makes no sense at all. To the contrary. Interest-rates have been falling like lead-balloons for the last half-year or so, the rates you pay should too.

I never got the US credit-market. Seems bizarre to me to borrow money at credit-card-prices (i.e. unsecured debt) when one ALSO has a loan with security, namely the mortgage.

Assuming you've borrowed less than 80% of the fair market value of your dwelling, you get aproximately 4.75% here at the moment (and falling rapidly, predicted to hit 3% by summer) credit-card rates can easily be double that.

We've got credit-cards, but we've never once carried even a single cent balance past the interest-free period. Why would we when the credit-card costs atleast 2-3% more than the mortgage ?

But mortgages are less flexible in the USA, right ? Ours is fully flexilble, in the sense that we can, at any time, withdraw or repay any amount we choose, aslong as we stay within the limit. (fixed at 80% of the fair-market-value of our dwelling at the time we got the loan, i.e. the limit does not fluctuate even if housing-prices do)

Anyways, you're right. There's no reason at all to accept paying 11% interest, that's just nuts.
medryn
Jan. 22nd, 2009 02:36 pm (UTC)
Re: No sense
Over the past 10 years, many Americans have agreed with you. They have paid off their credit card bills using home equity loans (or home equity lines of credit) and have thus transformed unsecured debt at a higher interest rate into secured debt at a lower interest rate (and tax-advantaged secured debt, at that!)

Of course, there is an obvious downside. If you get in over your head and stop paying your credit card bill, you take a ding to your credit rating but you still get to keep all the cool stuff you bought. If you stop paying your mortgage, you lose your house. There is a reason that unsecured debt is more expensive than secured debt :-)
dnivie
Jan. 23rd, 2009 08:31 am (UTC)
Re: No sense
True. And that's an excellent point. A flexible mortgage is a huge risk for someone lacking self-dicipline. Maxing out a $250K mortgage takes -sligthly- longer to recover from than maxing out a $10K credit-card.

Seems strange to me that US tax law cares what -kind- of a debt you have, surely if one person has $200K mortgage, and another has a $180K mortgage and a $20K credit-card debt, then both are equally indebted.

Makes no difference at all here -what- kind of a debt you have or -why-. Only that interest-paid counts as a financial loss, for reasons of symmetry, since interest-received counts as financial-gain.
( 13 comments — Leave a comment )

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