Marc's Mortgage Matter's

My credit is so bad I need a cosigner to play Monopoly ;/

Banks are struggling to make money in the credit card business these days, and consumers are paying the price. Interest rates are going up, credit lines are being cut and a variety of new fees are being imposed on even the best cardholders.

One recipient of new credit card terms is Anita Holaday, a 91-year-old in Florida, who received a letter last month from Citibank announcing that her new interest rate was 29.99%, an increase of 10 percentage points.

“I think it’s outrageous they pursue such a policy,” said Susan Holaday Schumacher, Ms. Holaday’s daughter, who pays her mother’s bills. “That rate is shocking under any circumstances.”

While the average interest rates charged by banks are lower than Ms. Holaday’s, her situation is not all that unusual. The higher rates and fees reflect the grim new realities of the credit card industry — the percentage of uncollectible balances has hit a record even as a new law may further limit the cards’ profitability.

Banks began raising interest rates and pulling back credit lines about a year ago as delinquencies crept upward and regulators discussed reforms. As banks have become more aggressive in making changes, lawmakers have accused them of trying to impose rate increases before many of the new rules take effect in February.

Last month, the Federal Reserve provided new evidence of the banks’ actions. About 50 percent of the banks responding to the Fed’s survey said they were increasing interest rates and reducing credit lines on borrowers with good credit scores. About 40 percent said they were imposing higher fees. The banks also said they were demanding higher minimum credit scores and tightening other requirements.

A study by the Pew Charitable Trusts, released late last month, concluded that the 12 largest banks, issuing more than 80 percent of the credit cards, were continuing to use practices that the Fed concluded were “unfair or deceptive” and that in many instances had been outlawed by Congress.

In response to voter complaints, the House of Representatives voted last week to make the law effective immediately. The bill now goes to the Senate, where a vote has not been scheduled. The Senate Banking Committee chairman, Christopher J. Dodd, Democrat of Connecticut, meanwhile, is pushing legislation that would freeze interest rates on existing credit card balances until the law takes effect.

Whatever the starting date, the law makes it much harder for banks to change interest rates on existing balances, and requires more time and notice before a new rate can go into effect.

The nation’s largest banks are scrambling to figure out a new business model that fits within the new rules and current economic conditions. Those banks made handsome profits over the last decade by charging high interest rates and penalty fees to a small group of customers who routinely paid late or exceeded their balances.

Already, banks are shifting to a model in which a smaller pool of Americans will be eligible for credit cards, and customers with cards will probably pay more for the privilege through annual fees and higher interest.

Still, even consumer advocates have said that the banks were too quick in the past to give out credit. “You know, it doesn’t take a rocket scientist to figure out that if you keep borrowing and borrowing in order to consume now, eventually you crash and burn,” said Martin Eakes, chief executive for the Center for Responsible Lending. “That’s what we’re facing.”

Banking officials said that because the new law limits their ability to reprice credit as a customer’s risk profile changes, they will instead have to price for future risk at the start, when a cardholder applies for a new card.

That means fewer applicants will be approved for new credit cards, and those who are accepted will increasingly be charged annual fees or variable interest rates, rather than fixed rates. Currently, about 20 percent of credit cards charge annual fees, a percentage that is rising, said Bill Hardekopf, chief executive of LowCards.com. Current cardholders, too, will be affected.

Asked to explain its rate increases, Citibank issued a statement saying the “actions are necessary given the losses across the industry from customers not paying back their loans and regulatory changes that eliminate repricing for that risk.”

Ms. Holaday Schumacher did not accept that explanation. She said she haggled with Citibank to try to get her mother’s bills forwarded to her house in Washington and, during the process, two bills were inadvertently paid late, resulting in the rate increase.

“How unbelievably unfair for an older person who might not understand what this is all about,” she said. Citibank declined to comment on the account.

Still, many of the nation’s banks are trying to repair their tarnished reputations with consumers.

American Express and Discover Financial, for instance, have vowed to stop charging fees when cardholders exceed their credit limits. JPMorgan has started a program that can help consumers categorize their spending and pay down their balances more quickly. 

A woman wakes up during the night and her husband isn’t in bed with her. She goes downstairs to look for him and finds him sitting at the kitchen table with a cup of coffee in front of him. He appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of his coffee.
"What's the matter, dear?" she asks: "Why are you down here at this time of night?"
The husband looks up from his coffee and says: "Do you remember 20 years ago, when we were dating, and you were only 16?" he asks solemnly.
"Yes, I do," she replies.
"Do you remember when your father caught us in the back seat of my car foolin around?"
"Yes, I remember," says the wife, lowering herself into a chair beside him.
"Do you remember when he shoved the shotgun in my face and said: ‘Either you marry my daughter, or I'll send you to jail for 20 years?’”
"I remember that, too," she replies softly, placing her arm around him.
He wipes another tear from his cheek and says, "I would have gotten out today."