Credit card counter scamming

[[AK]Clay]

I have a dirty secret – I’ve been scamming the hell out of credit cards. No, nothing fraudulent of course. I’ve been abusing the free sign-up programs. It’s my little revenge for the first time one of them tried charging me $50 for being late on a payment once. What’s my take so far? About 75,000 free frequently flyer miles, a pair of binoculars, and a laser range finder. The trick is, all these cards have annual fees. They waive it for the first year. So I use the card for a pack of gum, wait 6 months, get my goodie, and cancel. The caveat – about 2/3 of the companies conveniently forget that you canceled, and on your 12 month anniversary will send you bill for that $60 annual fee anyway. So be prepared to chew someone out on the phone. Then have to do it again when they forget that. And then 2 more times. Generally it takes about 5 calls to actually cancel and get their fee’s wiped out. A small PITA – but sticking it to the man does take effort you know.

So, my question now is, what is Bank of America offereing first time credit card customers these days?

[[AK]Hylander]

Just be aware that too many opening / closing of accounts can hurt your credit score and that if you have other credit cards with balances, closing the account increases your utilization rate since that cards available credit is no longer being calculated in your utilization rate and that can hurt your credit score as well. Not only that, but credit card companies examine your credit every 6 months or so and they may be able to jack up your rate on your cards with balances if they want to based on what they see (read the fine print in the terms) - particularly in terms of your credit utilization rate.

Just something to be aware of.

[[AK]Vaxschulah]

My wife has a BoA card at 16.9% interest. She got a letter the other day saying they were going to raise her interest to a variable 25.99%. She has not missed a payment and their reason for raising it is concerning an ammendment to the rate formula in her credit card agreement. The letter does state that she can reject this ammendment in writing as long as she doesn't use the card again. It also says not to call.

So, is it possible to call and chew someone out to get our old agreement to stick? Or should I just plan to reject the ammendment, pay off the balance, and not use the card again? I won't pay 25.99% interest.

Is it better for my credit rating to cancel the card or keep the available balance open?

Clay, where are you finding these cards that give free stuff? I have never gotten anything for free from a credit card. Of course, I throw out 99% of the applications without looking at them.

[[AK]Hylander]

My wife has a BoA card at 16.9% interest. She got a letter the other day saying they were going to raise her interest to a variable 25.99%. She has not missed a payment and their reason for raising it is concerning an ammendment to the rate formula in her credit card agreement. The letter does state that she can reject this ammendment in writing as long as she doesn't use the card again. It also says not to call.

So, is it possible to call and chew someone out to get our old agreement to stick? Or should I just plan to reject the ammendment, pay off the balance, and not use the card again? I won't pay 25.99% interest.

Is it better for my credit rating to cancel the card or keep the available balance open?

Clay, where are you finding these cards that give free stuff? I have never gotten anything for free from a credit card. Of course, I throw out 99% of the applications without looking at them.

Unfortunately this is NOT uncommon, even though it's stupid. Let's see... we sense risk in your account for delinquency, so we are going to RAISE your rate so it RAISES your minimum payment so we can help make sure there is delinquency in the future.

The best way to approach it is to call and ask to speak to an account representative and say that your rate was raised on your card and you'd like to speak to someone about getting it reduced. Be NICE.. it does help. Just explain - if it's the case - that you have good credit and you can get a card with someone else but you'd like to continue using this card if they reduce the rate back to what it was. If not, you'll have no choice but to take your business elsewhere.

In terms of credit score affect, it depends on your situation. Let's say you have cards with credit lines totally $20,000 for the sake of the discussion. You have balances totalling $12,000. Your utilization rate is now 60%. You are using 60% of your available credit line. Now, let's say that card has credit limit of $7,500, and a balance of $5,000. Well, the balance is not going away (unless you pay it off), but you just reduced your credit line availability from $20,000 to $12,500. Now your utilization rate is 96%! That will really hurt your credit score.

Me, personally, if the card has a rate over 12.9% it's either closed or never used unless there is a 0% transfer for life offer or something.

Check out http://www.creditcards.com/index.php...KNC-GooglePaid to search for offers. I like American Express myself.... I'm on their CEO's Christmas Card list for contribution to their bottom line. But I use one of my cards to pay as many bills as possible to get the reward points, then just pay it off in one payment at the end of the month. What's nice with AE is that you can either use the points to buy merchandise, gift cards, or 'rewards', or you can use points to be applied towards your balance as a payment. They even 'lend' you points in advance.

[[AK]Beaker]

Another Caveat

Don't sign up for one under your wife's name because the whole opening and closing thing irritates her greatly.
She also tries to throw away most of these offers as soon as she sees them unfortunately she doesn't get the mail first.

We also have credit cards that I have had open since I was a sophmore in College so we have a long credit history with some companies to help offset the negative with the opening and closing thing that Clay does.

Fees are increasing in general because of the current credit crunch in the markets. Fees are simply the most profitble way to make up for other losses. So expect fees to go up in general.

Also Clay and I don't carry a balance on any of the credit cards so the interest fees tend to not be a concern for him.

[[AK]Nuts]

When I called to update my Credit Card with my new home address the lady on the phone said, "Gee, we noticed you haven't used your card in quite some time, perhaps we can offer you a short-term lowered interest rate?" I asked what my current rate was. Answer: 21.99%. "Wow, instead of a 2% rate for 6months, why don't you drop it down to about 14 or 16% permanently?" They said that they couldn't do that.

They want you to spend, spend, spend and they lure you into it by short-term low interest rates which they immediately jack up and then refuse to lower the rate no matter how good your score is. My FICO is about 780 and we carry very little debt (except of course the house we just bought) and they still won't budge. CC Companies suck ass. We only use them for emergency car repairs and when we want something big and don't want to wait for my bonus (new TV was bought this way... opened a Sears card with no interest for 1 year, I'll get my bonus and then we pay it off.) Did the same for our bedroom set 3 years ago.

[[AK]Abaddon]

We have USAA as our credit card holder, and I have to say, they are the first ones that did not abuse us. Their rate is consistently low ... about 12 percent now, and goes down every time the prime goes down, so it will probably be back to 11 percent or less soon. The caveat -- you have to have a military tie to be a member. My wife spent 7 years in the Army, so we qualify. USAA is NOT predatory the way a lot of the other ones are.

I had bad experiences with BOA, Chase, and Wachovia back when my credit was sketchier - including that "we're going to hike your interest rate because you might miss a payment, to ensure that you do" bit. I hate them all.

USAA has our mortgage, car insurance, home insurance, and credit cards. :-)

[[AK]Hylander]

Your best bet is always a good credit union.

[[AK]Bribo]

Your best bet is always a good credit union.

Nonsense. I'd go with one of the nations largest banks (starts with B and ends with A), ask them for the highest interest rate that they offer and then start charging up a storm.

[[AK]Sonic Boom]

Nonsense. I'd go with one of the nations largest banks (starts with B and ends with A), ask them for the highest interest rate that they offer and then start charging up a storm.

It's patriotic! :-) (kidding...)

This has been a darn good thread. I'm with BoA and after reading this, I went and checked things an saw mine at 14.47%.

Gonna do some checking and see what I can save. Now that Boeing Employees CU is letting the public in, I'm going to take a look at them.

[[AK]Hylander]

More Bank of America Goodness

Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America is hiking rates based on no apparent deterioration in their credit scores at all.

As banks hit hard times, they're turning up the heat on customers. The latest is Bank of America who incited customer ire by raising rates for some cardholders by as much as 28 percent -- and worst of all, giving no reason.

The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter—headed "Important Amendment to Your Credit Card Agreement"—advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a "periodic review" that assesses customers' credit risk. She declined to say if the Charlotte (N.C.) bank had changed its credit standards thereby bumping some consumers' rates or how many cardholders were being affected by the review. Bank of America has 40 million U.S. credit-card accounts.

Buzz about the letters is building on the Internet. Since mid-January Credit.com, a credit-card information site, has received 40 complaints from consumers Bank of America had notified of sharp rate increases, even though they were current on their bills, says Emily Davidson, a Credit.com researcher. Complaint sites My3cents.com and BankofAmericaBadforAmerica.org say they have also received similar complaints.

The so-called "opt-out" letters give borrowers the option of no longer using their card and paying off the balance at the old rate. But they must write Bank of America by later this month if they plan to do so—otherwise their rates on existing and new balances automatically rise.

Arbitrary Criteria
What's striking is how arbitrary the Bank of America rate increases appear, credit industry experts say. In recent years, many card companies have turned to a practice called "risk-based pricing," where they will raise a regular paying consumer's rate because of a decline in the person's FICO score. FICO is a credit-risk score developed by Fair Isaac that includes a number of risk metrics the Minneapolis company doesn't disclose. Credit reporting bureaus supply creditors with FICO scores along with other data, such as late payments and debts owed.

In a December congressional hearing spearheaded by Sen. Carl Levin (D-Mich.), lawmakers slammed big card companies for using such pricing with customers who pay on time. By law, credit-card lenders can change terms as long as they notify borrowers. Even so, JPMorgan Chase and Citigroup announced ahead of Levin's hearing that they would stop the practice of raising card rates based solely on FICO scores.

But Bank of America appears to be taking an even more aggressive stance because, beyond credit scores, it is using internal criteria that aren't available to consumers. That makes the reason for the rate increase even more opaque. "Congress has faulted credit-card companies for lack of transparency in raising rates," says William Ryan, a financial industry analyst at Portales Partners, a New York-based research firm. "Bank of America is bringing it to a new level."

An Unjustified, For-Profit Move
Analysts also say they are surprised by the magnitude of the rate raises Bank of America is imposing on affected cardholders. Michael Jordan, 25, a software developer who lives in Higganum, Conn., says he received a letter from Bank of America in late January advising him that his card rate would rise from 9.99% to 24.99%. The software developer, who earns $80,000 per year, says he was "shocked" because his payments had been on time and his credit score hadn't changed in the last year. In fact, Jordan says, he has only $4,500 in overall outstanding credit-card debt on two cards and that, on the Bank of America card in question, he had paid down his balance to $3,000 from $3,700 last August. "His rate increase seems unjustified based on his credit profile," says David Robertson, publisher of The Nilson Report, a credit-card industry trade publication.

When Jordan called Bank of America about the higher rate, he says, the bank representative couldn't explain why his rate was going up. On a second call, he adds, the individual told him the reason for the increase was that he hadn't been paying down his balance fast enough, though he had lowered it by 19% in the last six months and was only now utilizing 54% of his $5,500 credit limit. Riess, the Bank of America spokeswoman, declined to discuss individual rate increases or to list all the criteria the bank was using as reasons to raise rates on existing cardholders.

Analysts say the bank's move is obviously aimed at shoring up profits. On Jan. 22 Bank of America reported a 95% decrease in fourth-quarter earnings due mostly to increases in loan-loss reserves for consumer credit, including rising card charge-offs and write-downs in mortgage-related securities. Bank of America faces another profit sinkhole with its pending acquisition of troubled Countrywide Financial (CFC). Portales' Ryan notes that boosting rates on existing credit-card holders is one of the quickest levers a bank can pull to try to boost earnings.

Anticipating Charge-Offs
Bank of America hasn't made it easy for consumers to reject the new rates. The letters require that consumers write Bank of America to agree to no longer use the card and pay off the existing balance at the old rate—they can't telephone to do so, nor does Bank of America provide a form or a return envelope. Moreover, consumers don't have much time to respond. Cardholders say they got the letters in the latter half of January: four of the letters obtained by BusinessWeek require a written response by Feb. 19, while the fifth requires a response by Feb. 29. If the company doesn't get a response by those dates, rates automatically rise. A response, of course, assumes consumers read the letter from Bank of America as they sort junk mail. "It's a reasonable assumption that most don't," says Karen Gross, a legal scholar on consumer credit and president of Southern Vermont College.

Bank of America also benefits from consumers who do write in an agreement to pay off balances at the old rate and not use the card again, says Nathan Powell, a credit analyst at New York-based research firm RiskMetrics Group. The bank, he says, is clearly trying to protect itself from worsening credit-card charge-offs ahead, something analysts widely expect in the card industry as the economy deteriorates. Powell says the bank must have identified a list of other credit criteria besides FICO that it is using to screen cardholders and determine it's no longer worth new business if they don't accept the higher rate. So far, Bank of America's charge-off rates have risen in line with the credit-card industry, up to 5.08% of receivables at the end of the fourth quarter from 4.57% a year ago. "The bank doesn't want to get behind the curve," Powell says.

"Unacceptable" Hikes
Bank of America is trying to get ahead of Amanda Pennington, 29, of Euless, Texas. She says the bank raised her credit limit three months ago from $5,000 to $8,000 because of her strong payment history. Then she got the letter from the bank in mid-January notifying that her rate would rise from 15.74% to 25.99%. When she called, she says, the bank told her it was raising her rate because her balance was now too high, though it was still under the higher new limit the bank had previously granted. After paying tuition for a community college course, transferring another balance, and paying for daily expenses, Pennington's Bank of America debt now stands at $7,500. Bank of America declined to comment on individual customers.

Adam Levin, CEO of Credit.com and former head of New Jersey's Division of Consumer Affairs, says he is surprised Bank of America would risk bad public relations with its rate increases, given the congressional hearings in December. The bank risks alienating new customers and existing ones by being so brazen, he says, adding, "Either Bank of America has more financial troubles than it is willing to admit or it has a level of institutional arrogance that is unacceptable."

[[AK]Vaxschulah]

More Bank of America Goodness

My situation falls in one of these scenarios. My letter goes out tomorrow and I am done with BoA. I am wondering if I need to go certified mail or not...I don't trust these guys at all.

[[AK]Clay]

Clay, where are you finding these cards that give free stuff? I have never gotten anything for free from a credit card. Of course, I throw out 99% of the applications without looking at them.

http://www.creditcards.com/

[Valkyries]

Good read, makes me glad I don't have credit cards.

Vax, definitely, I'd use certified mail without a doubt. The whole point of them doing this is so they can claim to have "never received" the letter.