Nostalgia for the Credit Card Rates of the Good Old Times

The government sees us buffeted around by the recession, and lowers its benchmark interest rate for credit card borrowing to next to nothing. So why do we still get bills that seem higher than ever and keep reading about how this is nothing compared to how high the fees and rates are going to go? That isn't how it works usually; when Wal-Mart uses strong-arm tactics with its suppliers to lower their prices, we usually benefit from it and see lower prices; when the Federal Reserve cuts credit card rates, the credit card companies are supposed to just pass the benefit onto us, so our monthly payments are lower and our interest rates too. Apparently, we're just paying the price now for all the mistakes they made in the past, handing out multiple credit cards to anyone who applied, and sometimes to people who didn't apply - just tempt them into accepting one. They've made so many losses over the years, that they need to milk us dry now to make up for it. So now their carelessness brings us here: even if you have been the perfect credit card customer, Citibank and American Express believe that you need to pay two or three percentage points higher for carrying a balance, and if you were hoping for a few rewards for being a responsible customer, well, those programs have been shelved indefinitely.

You have to look at what those credit card companies are dealing with; all those people they dealt easy credit cards out to like they were dealing cards around a poker table before, have racked up very high charge-offs, you know, what you and I would call bad debts. They amount to 5% of all the credit card charges they financed. So now Citibank and Amex are looking to you and me to pay higher credit card rates and fees, so that they can do something about all the money they lost. So who do we charge more to make up for what we lose to Citibank and Amex? They must feel it would not make the game quite as much fun for them if they continue to let you enjoy a certain amount of credit freedom on your cards. They feel that there are quite a few people out there who are teetering on defaulting on their credit card bills; so to head off potential losses like that, they just want to cut your credit.

Good solid citizens, people who work in management firms, software businesses, all report stories like how they used to have a $15,000 credit line, until suddenly Amex notified them that they would have to get by with a $500 credit line from now on. And the reasons they hear for why this was done to them, are pretty incredible too. They run to lines like, "Oh, you have a credit card issued by that other bank too; and we see that they made some bad choices in customers to issue credit cards to in the past; if they made bad choices with customers in general, who knows, you could be a bad choice they made too; so we don't really want to take a risk on you anymore". If that is not incredible, I don't know what it is.

And one thing that really hurts, is the way their promotional deals and rewards programs, once through the roof, are now out the window. Balance transfers on Amex for example, were 5% for the life of the balance. Now, they give you a limited period only. Discover too always said that they would never charge you a balance transfer fee that was higher than $75; they have taken that away now. The best thing to do now to get in the good with the credit card companies is to carry low balances on your card. If you carry anything without paying it back on any of your cards, all the other companies are going to know. They always have lower credit card rates and fees for people who regularly pay more than the minimum monthly payment.

You can of course opt out of your credit card if they raise their credit card rates unduly and unfairly. It could hurt your credit score, but this is something you could recover from.