'Unfair and deceptive' practices among 100% of top banks' credit cards

Anticipating the February trigger of the Credit CARD Act's final phase, banks have dramatically raised interest rates, imposed new fees, jacked up old fees, and changed terms, a new report by the Pew Charitable Trusts says. In fact, 100 percent of cards issued by the nation's 12 largest banks used practices that would be considered "unfair and deceptive" under the new law, the report says. 

The report, which follows up on a similar study done in the spring, shows rampant anti-consumer activity:

•Nearly all (99.7 percent) of bank cards allowed the issuer to raise interest rates on outstanding balances by changing the account agreement unilaterally. That's up from 93 percent last December.

•95 percent of cards allowed issuers to apply payments in a manner that the Federal Reserve found "likely to cause substantial monetary injury to consumers." (The other 5 percent weren't necessarily good guys; they just didn't disclose their policies.)

•The median late fee remained unchanged, at $39. Eighty percent of bank cards also charged a $39 overlimit fee. The median penalty rate was $28.99 percent; 90 percent of banks allowed that rate to continue even after the consumer resumed on-time payments. 

•Credit unions, another option for consumers, offered interest rates between 9.9 and 13.75 percent, about 20 percent lower than comparable bank rates. And their penalties were generally less severe than those of banks. Most credit unions levied late and overlimit fees of $20. 

The report recommends consumers consider obtaining cards from credit unions, though they represent only 1 percent of the credit-card market. Consumer Reports does the same; read more of our tips on finding good credit cards. And here's some sage advice from Consumer Reports Money Adviser on the right way to pay off your credit-card debt.

Some members of Congress have introduced legislation to rein in credit-card issuers now. Click here to tell your Congressperson to speed up the Credit CARD Act's effective date to Dec. 1, 2009. And feel free to comment below on what you've experienced.  As comments on our previous credit-card blogs show, consumers are outraged with the banks' ugly last hurrah.–Tobie Stanger

Comments

[Steven T.]

After my business' credit card limit was lowered to $100.00 above the balance and the interest rate raised to 29.9% from 9%. I tried to stay afloat using personal credit. Then the same thing happened with my personal credit cards. I've given up. I don't even have enough money to pay for a bankruptcy attorney. So, credit card companies good luck, I'll carry this debt to my grave and you will not see another dime from me.

[Jonah]

This just in; the sun is hot, water is wet and credit card companies ALL prey on their "customers" to make a buck. From charging 80% rates upfront (http://debtbeat.com/2009/10/eighty-percent-rate.html)to playing "guess your rate" every month they've forced the hand of government who couldn't sit back any longer.

If we go after Somali pirates in East Africa we should go after bank pirates in East St. Louis.

[Floyd C Godfrey]

Supports my experience with the finiancial groups I do business with.

[John]

So wait, let me get this straight:

The government steps in to save us all, and it causes the situation to get... worse?

...Imagine that. How about this instead: don't spend money you don't have. Wasn't there an SNL skit along those lines?

[Sharon Z]

I give the credit card companies 6 months to find every loop-hole in the new regulations. How nice for them that we'll all have a false sense of security since the government is looking out for us.
Caveat emptor

[Rindy]

Credit cards are the slave ships of this century, big difference, we aren't forced to get on!

[Kerry J]

Credit card interest rates and over draft fee would not have become such an issue if the American public would cease to think that credit is the savior of our personal and business finances. Only charge what can be paid off at the end of the month. Remember the old addage, "if you can't pay cash for it, you can't afford it."It seems as if the american public has taken a page from governments play book with the exception that the public has no where to go to get additional income to pay for the additional expenses. I hope that dinner out that was financed by the credit card was very good and worth it since it was financed by the allmighty credit card and by the time it gets paid for, that dinner will have cost three times (or more) as much as what was listed on the menu. As far as plastic goes, one could keep enough money in a bank account and use their debit card. Credit card companies are only their losses from the irresponsible people who over use their credit and not pay the lender back.Just remember that credit cards are unsecured loans. If they are not paid for then the banks have absolutely no leverage to recover the losses without raising the fees associated with them.

[sc]

Use cash instead of credit cards and you won't have to worry about it. We paid off and closed all our credit cards last year just as credit card banks started upping their rates and fees, even to "good" customers...you know, the ones banks actually hate because they don't use all their credit and pay off their balance in full every month. Never been happier than to know that I do NOT do business with companies like this anymore!

[sc]

Remember: Borrower is slave to the lender. Do you really want to be the slave of people who do business this way?

[obiwan]

I think credit cards just need to be banned altogether; they're too unsecure, the businesses behind them are criminals with malicious intent, people get addicted to them until they are bled dry of all their money, and then they ruin people's lives. They're the financial equivalent of crack cocaine. Just ban them, there's no valid reason for them to exist that benefits the common good.

[Rob Steele]

"[R]ead more of our tips on finding good credit cards."

There ain't no good ones. There is no such thing. Good credit cards is a class of objects that has ceased to exist. It has expired and gone to meet its maker. It's a stiff! Bereft of life, it rests in peace! It has kicked the bucket, shuffled off its mortal coil, run down the curtain and joined the bleeding choir invisible!

[Kelli]

Here's a thought.....don't spend money you don't have and you won't have to worry about this. Have an emergency fund in cash instead of a credit card for emergency use. Have 6 months savings in the event of illness or unemployment instead of borrowing money. If you don't borrow money, you don't have to worry about paying fees.

[Wizard Prang]

"Just remember that credit cards are unsecured loans."

But under the new Bankrupcy laws (sponsored by our friends the banks) it is now much more difficult to get a "clean slate" bankruptcy - now most people end up with a "repayment-plan" bankruptcy... in which their "unsecured" loans are effectively "secured".

[David M.]

I love my credit card rewards programs. I pay for everything I can on the cards and pay them off every month. The points have covered several week-long vacations at luxury hotels. I've got airline miles enough for a couple of trips. I get cash back on a couple and some miscellaneous rewards on another. Over the last decade I probably had to pay two late fees when I accidentally missed a payment date. You can control the cards or let them control you. Your choice.

[BJ]

Cut up all your Credit Cards...PAY CASH! If you can not pay cash and don't have the money in your bank account to use a Debit Card, you don't NEED it! Debt is NOT a good thing! Go to www.daveramsey.com for info on how to become debt free and FREE to LIVE like no one else! Let's put the credit card companies out of business and stop this madness NOW!

[Joe]

I used to think that having a credit card was important -- so important I would keep it (or try to) no matter what. The card company made one big mistake -- they thought that my having a card was important to me as it was to them.

Turns out, I don't need a credit card(s) at all. Cut 'em all up in January of '08 one night in a Dave Ramsey class. Took several months to re-align my thinking and having to really do a budget instead of depending on my rich uncle Citibank to take up the slack.

I believe that my having a credit card was probably more important to the bank than it was to me.

Paid off Citibank just today -- Know how much money they are going to make off me now? $0.00
Paid off two Chase cards in summer of '08. Know how much Chase has made off me this past year? $0.00
Paid off RBS this summer - They haven't made a nickle off of me sinice August.
American Excess -- you're next -- Looks like by the 27th of this month.

This snowball thing is almost infectious -- American Express only takes two weeks to pay off when I have all the money I used to spend with my car payment, both chase cards, the RBS card, and now my Citibank card at it. -- about two weeks.

Then we tackle the 2nd mortgage on the house, which is poised to bite us in the butt in five years -- it is one of those interest only things until then. Barring any serious hiccups, I am on target to be done with it around the end of '10 or beginning of '11.

My financial picture must be improving -- I am starting to get credit card offers in the mail again. I was in so far over my head that even the real ripoff ones wouldn't touch me.

Anyone seen the website "wheresgeorge.com" For added fun, I stamped all of the money I paid off Citi with today. It'll be fun to see where it turns up.

Keep telling it like it is, Dave -- I still have your CD's and listen to them when I start get discouraged. I'm thinking about finding a class and sitting in again, kind of a refresher. It's been two years so far, but I am finally starting to see some light at the end of the tunnel.

I'm so fired up at paying off Citibank I can't sleep, and I need to be at work in 5 hours eeek!

[Steve]

I've paid off my credit cards in full almost every month since I first got a card 25 years ago. There have been three or four extraordinary expenses that I couldn't pay off in one month, but I was willing to pay interest in exchange for that convenience. I'm not complaining about that.

There have also been a few times that I misplaced my bill, or forgot to pay it until a day or two after the due date, or something like that. I was NOT buying things on plastic that I couldn't afford in real life; I just misplaced an envelope or misread a calendar. Things that can happen to anybody.

Under the new rules my bank sent me yesterday, doing that once means I pay 25% interest for THREE months, not 19% for two months as before; doing it twice in a year means I pay 27% interest for the following year.