07 Feb 2009
Credit Card APR
“I am more happy to be communicating my desires to you Mr. President, than for you to hopefully be reading them. I know you are a very busy man, but I have one question for you, that hopefully passes across your eyes: Where is the transparency with the credit card companies? Your team wants to spend millions more on the DTV switch, yet you could stimulate our pockets better by having these shady companies REDUCE interest rates across the board for every American, and see immediate results.”
My Bank of America APR increased to 28.99 percent from 22.99 percent. Yeah, just 6% you say. Not as much as some other people, you say. Your point? Whether I now have to pay an additional $1, $10 or $100 dollars, it is THAT much less money in my pocket. That much less money I have to spend as a consumer. Obama’s Administration wants to stimulate the economy? Try getting these credit card companies, who are increasing APRs because of THEIR BAD MANAGEMENT decisions and an increase in the number of people defaulting on their payments, to actually LOWER the APRs. Maybe then, more people would see a light at the end of the tunnel. Maybe more people would be willing to work through it and try to pay off the debt instead of simply filing for bankruptcy.
If my bad decisions caused me to get in so much debt I couldn’t find a way out, why does the bad decisions made by these companies not only get them government assistance, but also give them a real good excuse to make some extra money while they are at it? Where is my handout? Where is my free ticket for my bad decisions? Oh wait, I don’t have the political pull that would be necessary to get a JLA BailOut package, do I?
As has been said already, the Government is making a very bad precedent for companies that fail to go running to them looking for assistance. Now I am totally all for Socialism, but done the RIGHT way. Star Trek or Babylon 5 style where the government is run by honest folk who run and provide everything for everyone and people are not greedy and gluttonous, but strive to excel and improve themselves everyday. Ok, JLA Niave Hour is over now.
On one side, these companies are getting help and on the other they are taking advantage of consumers. You want to know why credit isn’t loosening up? Interest Rates. These companies are all playing ball, old school style. For the moment, it may APPEAR to be working according to their number crunchers, but in reality consumers like me and you have that much less money to put into the economy, and that much less revenue is being made by companies, who are forced to increase prices on the few consumers who still have some money because they were lucky or smart enough to avoid a lot of debt and these consumers in turn are now really making every dollar stretch as far as possible. It is a vicious circle, but the credit card companies are simply jumping on the bandwagon because of their bad choices in the financial market.
They are taking advantage of the politics of the situation, making this “need” for them and their companies. An artificial need, for sure. If everyone lived in their means, as we all should be doing, what need would there be for companies like these? The fundamental problem lies in the price inflation of certain worldly goods that are commonly accepted in today’s society as “needed.” A house, a car, a boat, etc. With less people building their own, because of a lack of skill or the laws that have popped up to prevent people from doing it, house prices inflated. That created a demand for loans. Which carried over to automobiles and of course anything else you can purchase that costs more than you make. Loans soon turned into a credit system, where you may not want something as expensive as a house, but you want some pricey things and cannot afford them.
With no proper regulation from the beginning, these companies have a lot of people stuck. The people who can’t pay, have now created the demand for another job - “debt consolidation.” As if I or anyone else couldn’t consolidate our own debt if these credit card companies would actually work WITH us? But oh no, we need to be some big bad business to be able to “consolidate” a person’s debt. Including our own!?
I just don’t get it. I am all for paying off my debt, thankfully I have a very small amount because I caught myself before I got sucked into the wormhole, but couldn’t these credit card companies be REASONABLE about things? Don’t jack rates because your management made bad decisions and you are trying to recoup your losses. You are not like a traditional business. If you lose money in bad bets, you shouldn’t be demanding more money from people who still don’t have it.
Unless of course, you want to keep them with all their debt, that way you get more money in the longterm? Maybe that is why you first lower people’s limits and then mention if they can get to 60% of their limit, they can get a lower APR? A little quick math in an example, you ask? $10,000 limit, $6,000 is 60%. If someone previously had say, $7,500 balance and were told to reach 60%, they would have a mere $1,500 to go. But if you first lower their limit to say $8,000 and then offer the 60% option, 60% of $8,000 is $4,800. $7,500 - $4,800 is $2,700. That is an additional $1,200 more that person now has to lower their balance by, instead of the $1,500.
Interesting little tactic, wouldn’t you agree? And yes, that was an EXAMPLE. At time have I ever held a credit card with a $10,000 limit! As if. Please. Only $10, really? Common. I have never had anything under $50k, duh!
