If you haven't, you will. Even if you weren't a reader of this blog, you would eventually hear about this little scam that's going on in the credit card industry.
Here's the deal.
If you pay one credit card late, all your other credit cards can increase their interest rate on you because now you're a higher risk. This can happen even if you have never made a late payment to the other cards.
Make one late payment to one card and the interest on all your cards might go up.
One oops. One, "No, I didn't send it in. I thought you paid the Visa bill." One mistake by the US Post Office. One . . . well, you get the idea.
Is that scary or what?
I think it's a sign. No, not a sign of greed. A sign that the credit card companies feel that they have people by the short and curlies. This is blatantly unethical and the word "lame" doesn't even come close to stating what kind of excuse they are using to raise interest rates on people.
The bottom line is that nearly every agreement has a little line where they can change your interest rate with 15 days notice. Sure, you agreed to pay 12% interest when you got the card but at any point they can raise that rate as long as they give you two weeks notice.
I think it's a sign that the credit card companies believe that they have consumers trapped. Obviously, anyone with the ability to get out of an interest rate hike is going to. No one is willingly going to stand for that. But where will they go? Transfer the balance to another credit card? It's going to be the same story. Refinance your house to get the equity to pay off your credit cards? Not in today's housing market?
The bottom line is that they are doing it because they can. People have sold their financial soul to the devil and the devil gets to do what he wants.
There is an answer.
I'll bet you think I'm going to say that people should pay off their cards and carry a zero balance. No, that is too hard and takes too much personal responsibility. Okay, that's what I would say so I'll rephrase.
People have an answer. Happy now?
They are asking the government to step in and put an end to this sort of thing. I'm not against this kind of legislation. Credit card companies are getting out of hand, it would seem. The more trapped they can get the consumers, the more brazen they will become about picking pockets. Protections should be put in place for people that find themselves in poor circumstances out of their control.
Now can we get back to my answer?
It's all about power. It comes back to supply and demand. The power has shifted from the consumer to the credit card company. We need to shift it back. People want the credit so much that they are willing to agree to ludicrous terms to get it. They are addicted to credit. They are being buried by credit and yet they want more.
If people would pay their cards off, credit card companies would have to compete for the cash. They would want our cash so badly that they would make better and better deals. We need them begging for our money instead of consumers begging for credit.
The government might step in to put an end to Universal Default but then what? There will be the next reason and the next reason to raise interest rates or impose fees. People agreed to these terms when they got the cards. I won't be suprised if in the near future the credit card companies will raise their rates on people and when asked why, they will respond, "cuz we wanted to and it clearly states in the terms of agreement that we can."
The government is never going to be able to step in and stop all interest hikes. The people who own the politicians wouldn't let that happen anyway even if there was pressure on the government to do so.
It all comes back to the consumers. Do we let them do this to us or do we take back control? Do we sign in blood or do we make credit card companies compete for our dollars?
I wonder what it will take before people wake up to what's happening.