What The Credit Reform Has Done To Me
As you guys probably already know, Federal regulators approved the sweeping changes that were proposed. I’m all for these changes, but the transition is going to be rocky. I myself just had a major setback from the changes – albeit, they happened prior to the legislature, but was done in anticipation of the reform being approved.
I have three credit cards that I carry, only two of which I actually use. I’ve shared a little about my story and background, so many of you may know that I’ve spent a good deal of my twenties trying to fix things that I did during my teens. It hasn’t been easy because really it takes time. Well, the one credit card I have that I don’t use just happens to be the card I’ve had the longest – which is the reason I haven’t closed it out.
The downside to this card is that it’s one of those cards with the monthly maintenance fee that I got when my credit was absolutely horrible. The upside to this card is that I’ve had it for seven years, never missed a payment, and always had on-time payments. So, while it sucks that I have to make payments on the card every month for this maintenance fee, I‘ve had it so long that it would seriously hurt my credit to get rid of it.
My plan was to carry the card at least two more years until my Chase credit card reached it’s seven year mark, and then get rid of it. By that time, I’d have another credit card with significant history. As I don’t have any major borrowing needs for the next five years or so, I felt like this would be a good time to go ahead and close out that card. As it turns out, my plans were in vain.
Given regulation changes and the state of the economy, my credit card company sent me a letter letting me know that the program for which my card is under is no longer available and that my account has been closed. I have one remaining bill for the month’s maintenance fee which they have “graciously pro-rated” since they have cancelled the program. This little incident has caused a 50-point drop in my credit score. Imagine my delight at this news.
As if that weren’t bad enough, this incident caused a ripple affect. Since my credit score went from 690 to 640 in such a short period of time, my lenders all decided that I’m a much higher risk and that I must be in financial trouble. Naturally, the best thing to do in that case is increase interest rates and decrease limits. Both of the other credit cards I carry shot up to 27.99% interest. My Chase card left the limit alone, but my HSBC (terrible card, by the way) dropped my limit to $1000 from $2500. I don’t keep high limits on my cards anyway, so this isn’t an issue per se, it’s just the principal of the thing.
Fortunately for me I have a friend that works in the card services department at Chase. I called him up and explained the situation to him and he was able to manually override the interest rate to 14%. Not great, considering my rate was 11.25% before, but marginally better than 27.99%. HSBC was not as accommodating. Needless to say, the whole experience has been rather frustrating. I can at least thank my lucky stars that I don’t have major lending needs and if I need an additional line of credit for anything, I can get one from my credit union. But, the fact still remains that there is a transition period coming with the new changes.
Banks weren’t kidding when they said these changes would affect interest rates. Since my rates shot up just prior to the changes, it was retroactive on the balance – Christmas shopping, which will be paid at the end of the month so it’s no big deal. But, going forward, I’m guessing we’ll see a lot less of those 0% offers, at least until the economy rights itself. The good news though, is that consumers have a lot more protection and I can’t complain with that. I’m definitely glad to be rid of that universal default and the double-cycle billing, two of the biggest offenders in credit card lending.
I was having lunch with a friend who was in a similar situation with her credit card rates going sky-high. She says I’m awfully calm about the whole thing, but like I told her, I’ve got time on my side here. Yeah, it sucks that it had to happen. It’s taken me a long time to get my credit score up, and to be that close to 700 and be yanked back down was not easy to swallow. But, unlike my friend, I don’t have major purchases planned right now, so I’m ok.
What’s more, I don’t carry balances so the rate changes aren’t going to affect my budget. I feel bad for those people who rely on these cards every month in order to survive. The rate changes that went into affect prior to the new rules will hit these folks hardest. In comparison, I can’t complain. But, my friend was looking to buy a house, so she’s pretty furious right now.
I’ve seen a lot of people at work that had their rates raised right before the legislation was passed, so I know it’s an issue for many people. Did this happen to anyone here?
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UGH! What a hassle for you! I have had a few small changes but nothing too severe, thank goodness.
Not much here in the Netherlands.
Interests have gone up slightly, but fortunately we don’t really have a stupid FICO like system.
My corporate bank account thinks it’s a good idea to charge 1.5% of my overdraw limit (Yearly) even if you don’t use it though!
My fiancee’s card rate shot up not too long ago. Very annoying since he does have a significant balance he’s been working to pay down. He’s paid down about a third of it, and was starting to see some nice progress and lower interest charges. Luckily it didn’t shoot up quite as much as yours!
@ Dawn – You’re quite lucky. It was a pain!
@ Barry – I’m moving to the Netherlands! In regards to your overdraft account being charged 1.5% even if you don’t use it, I think I would look into that if I were you. I don’t profess to be an expert in Netherland laws by any means, but that seems like highway robbery to me. Unless they disclose a specific fee per month for the maintenance (which isn’t any better) I don’t think they can charge you. But, check your disclosures!
@ Slinky – I’m glad your fiancee’s card didn’t shoot up as high as mine. I felt pretty violated, to be honest. Hopefully the rate change doesn’t discourage her from her plan! Best of luck to her!
*****Update***** The loss of this account actually came at a really bad time and the damage was worse than I initially anticipated. With my other cards’ rates jumping up, HSBC also decided to decrease my limit by A LOT! That move took me over my limit (from Christmas) and they reported that to the credit bureau. It’s paid off now, so the next reporting should help me out, but between the two, my score dropped almost 100 points. I’ll be honest, I was pissed! I was actually almost in tears. All my hard work has fallen to the wayside and I feel like I’m back at square one. The good news is that I called our rep at the credit bureau we use at the credit union and asked him what I could do. He said that unfortunately I’ll have to wait it out, but because it was just a matter of timing, I should get those points back on the over the limit within 6 months or so. We’ll see. I’ll believe it when I see it.