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Tuesday, 21 April 2009

A Nasty Little Credit Card Surprise

UPDATE: From The Washington Post this morning:

"The heads of the credit card divisions at 14 major banks are set to meet with the president and his top economic officials at the White House on Thursday, administration aides confirmed yesterday. They are bracing for a warning that the president will join the chorus of condemnation if they resist efforts to protect their credit card customers from unfair practices."

Read more here under the headline, "Card Issuers Brace for Stern Warning."

Crabby Old Lady never carries a balance on her credit cards. They are paid off each month except in extraordinary circumstances.

Ollie the cat's veterinary care for a life-threatening condition over Thanksgiving weekend was one of those extraordinary circumstances - thousands of dollars. Last month, Crabby finally paid the remainder on her Citi credit card - $310.43.

This last payment was made before the due date and Crabby has not used that credit card since Ollie's illness, so she was surprised Saturday morning when an electronic bill from Citi arrived. The balance should be zero and therefore no statement, but to her astonishment, there was a charge for $3.06.

Perhaps, thought Crabby, she had mis-typed the amount when she paid electronically. A check of her bank statement showed she had paid the correct amount. Crabby was puzzled. She pays off her main credit card from Chase every month without additional charges. What could this be? Then she read some fine print on the statement:

“We calculated the finance charges you owe us by using the Previous Balance shown on this billing statement. You owe us these finance charges because we assess finance charges daily on all your balances (including your finance charge balances) until we receive payment in full.”

In other words, it is not possible to pay off a balance on a Citi credit card – there is no such thing as payment in full.

Yes, Crabby knows the amount in this case is minuscule, but that is not the point. Calculate such additional fees from millions of customers over a year and you get a pretty good idea of where the cash comes from for those executive bonuses.

Crabby is wondering now if, after she pays the $3.06, there will be a bill next month for three cents. She would almost have been better off borrowing money from the local loan shark – which is a pretty good description of the consumer business practices of big-bank credit card issuers.

Credit card horror stories abound. In addition to interest rates jacked up to as high as 29 percent with or without a default, there are huge over-limit charges, phone payment fees, cash advance fees, sky-high late payment penalties. On the other end of transactions, credit card issuers charge many fees to merchants, ranging from one to six percent, for the privilege of accepting their credit cards.

Some might call all these fees gouging and in fact, as Congress gets going this week after their two-week vacation, both the House and Senate are considering a credit card bill of rights to require greater disclosure and to limit the banks' ability to raise interest rates on existing balances.

Too little, too late, as far as Crabby Old Lady is concerned, and one more instance of big banks enriching themselves on the backs of taxpayers.

As to the bigger economic picture (all this is related), the parent company of Crabby's credit card issuer, Citigroup, has received $50 billion in bailout cash and guarantees over four separate payments from the federal government (you and me) since last fall.

Citifield2During this period, Citi almost purchased a $50 million private jet until a phone call from President Obama put the kibosh on that. But they did pay out, with no White House objection, eight times as much for naming rights to the New York Mets new ball park. In the current circumstance, that appears a tad excessive to Crabby.

Aside from deregulation over the past 20-odd years, one of the reasons banks are allowed to charge usury rates, of which Crabby's $3.06 is a part, is that the government is filled with former banking executives who are protecting their own, just as many bank executives are former high-level government officials. And that is affecting how the economic crisis is being handled in Washington.

In a disturbing story in the May issue of The Atlantic, Simon Johnson, a former chief economist for the International Monetary Fund (IMF), explains how the banking industry has taken over government and why the recovery, as it is currently operating, cannot succeed. He writes:

”...the government's velvet-glove approach with the banks is deeply troubling, for one simple reason: it is inadequate to change the behavior of the financial sector accustomed to doing business on it own terms, at a time when that behavior must change. “As an unnamed senior bank official said to The New York Times last fall, 'It doesn't matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.' But there's the rub: the economy can't recover until the banks are healthy and willing to lend.”

I urge you to read the entire story. It is complex, but Johnson is a good writer and it's not hard to follow. For some lighter and shorter reading on bankers' arrogance, try The Wall Street Whine: Goldman Sachs Edition from Dean Baker.

As to Crabby Old Lady's minor $3.06 issue, she considered not paying it, but a black mark on her credit history is not worth so small an amount. Then she thought to have a phone conversation with Citicard customer service, but you know how that goes. Crabby's time is worth more than $3.06 for a long wait on hold followed by someone reading from a script about “company policy." So she will pay the fee.

Of course, that's always been part of corporate standard operating procedure – make it too hard to complain - so consumers must rely on the government which, in a massive Catch-22, is owned lock, stock and barrel by the banks. Crabby is not holding her breath for that congressional credit card bill of rights.

[At The Elder Storytelling Place today, Fred First ruminates on Rites of Passage: Growing Down.]


Posted by Crabby Old Lady at 02:33 AM | Permalink | Email this post

Comments

I share your pain Crabby. Today I'll be going 30 minutes round trip (the closest HSBC) to pay a .27 cent balance on my MCard. Yes, twenty seven cents! I, like you paid the balance in full last month before it was due yet yesterday rec'd a bill for the aforementioned balance. To pay by phone would cost me an outrageous fifteen dollars. An astounding fee when one considers that transaction involves no bank employee. The fifteen dollar fee is for ME tapping on phone buttons to communicate with the payments computer. Amazing.

I can't help wondering how much profit the bank will clear on my .27 cents balance after having printed a bill, enclosed a mailing envelope and paid for mailing, even at bulk rate. But as you said, the small amts DO add up to significant overall profits for the banks.

Maybe I'll make the check out for 1.00 so I won't end up with a running balance that never ends, lol I'd really rather that they owed me :-)

Signed
Cranky 50-something-oldish lady

Could you send them a check for $5 and then when they didn't send you the $1.94 credit right away...start charging them? Of course the irony of it all would go right past them and you would never receive a dime, but you might feel better.

Even while foundering, the banks refuse to lessen their grip on our throats. Last night I caught the tail end of a news report that explained why some big banks are returning bailout funds. It seems they cannot live with the restrictions placed upon them in accepting these funds.

I get my credit card from my credit union. I'm paying something like 8.5% interest. I understand (don't know) that there are plenty of ways people can get into various credit unions. Probably the most effective way to register a protest...

Before we consolidated everything into one card, I had a credit union Visa for a long time. They gave me great service for a reasonable interest rate.

You better believe I am going to investigate the terms of our latest card, the only one we carry now. We pay off every month as does Crabby, but in a jam would we subject to this same policy? I want to know.

The best way to handle this is to "vote with your feet." Find a new card with better terms. Proceed cautiously though. Banks have rigged the system so thoroughly that any action at all by the customer (applying for a new card, or canceling an old card) can affect your credit rating.

All of the points Crabby and others have made is why I do not now and will never again have credit cards. Yes they are nice to have in an emergency but what happens after the emergency is much too painful. It is too easy to sucker yourself into thinking something is an emergency when it is not or into thinking that you will just carry a small balance this month and then pay it all off next month because your check was a couple of hours short this week. And I have found through painful experience that credit cards are a temptation I don't deal with very well or very intelligently.

That is so irritating and we had a similar experience with a Kohl's credit card which we used to buy presents for grandchildren in January. We had paid it off on time but there was a charge somehow and that charge got multiplied late fee charged on late fee. We were gone and when we got back, there was another bill with even more charges on a paid bill. We called and complained. They took it off but the fact it was ever there is what makes a person angry. It means watch them every second. Also they send the bill in such a way that if you paid it by the due date, you'd be overdue already. I am cutting back on how many cards we have as there is also the problem when a number gets used fraudulently and it is even more of a hassle to clear up. Definitely frustrating

Many may be surprised to know that it was Martin Luther who is the "Patron Saint" of our modern, extortionist banking system. He sided with the Princes in the controversy over usury and wrote a long and fulsome letter on the validity of usury and other unsavory financial practices.
Today, the usurers (aka "bankers) are taking their TARP money and playing the Market. That's why many of the big banks just finished one of their best quarters ever.
When I was "a gamblin'man", it was against the rules to play with borrowed money- when you tapped out, you folded and walked away.
But bankers are bankers and you can't teach old dogs...
Oh, did you know that before Martin Luther's time, usurers, (like the ones who are chraging 10% per month on unpaid balances)were
BURNED AT THE STAKE!
Those were the good old days.

And speaking of DOGS, reminds me of growing up in florida after the depression. You've probably heard of the strays that invade the chicken pens. Once they get the taste of that first chicken, even if they're the best hunting dogs in the county, they're no good for anything else. Makes me think of banks today. I like Steven's idea of charging them on refunds we may be due. There should be a way!

It isn't just banks that charge usury. I will never shop at Sears again' After buying my refrig, stove, and dishwasher there I bought a over-the-stove microwave. Their installer couldn't charge it to my Visa and I had to use my Sears card. The amount was $121.00. When I got the bill I mailed a check for the full amount along with a check to a local merchant. Both checks were lost in the mail. I didn't realize that until I received a second bill from Sears that included a late fee plus interest in the amount of $43.00 (if my math is correct this is just over 28%). I wrote a letter of complaint explaining the situation when I sent the second check for the full amount along with my cut up Sears credit card. I didn't even get the courtesy of a reply.

Being a good customer meant nothing to a huge corporation. They would rather have the $43.
By the way, the local merchant removed his late charge when I explained the situation.

I may be a hayseed on this subject but it has been my experience to have received plenty of grief from banks over my lifetime..so, two words: Credit Unions. Credit Unions have always been up front with me about all charges. No surprises and no attitude. Long may they run.

Citi is evil. Go to your local credit union, open an account, and get a credit card from them. Seriously, I haven't been near a bank in over 25 years. Evil, evil things.

I'm with Steve. And, I have been using a credit union for decades. Also, they charged less when I refinanced my house.

Not long ago, a couple of the banks were considering charging a fee every month that their customers DIDN'T us their cards. Thankfully, they abandoned that plan.

Count me as another vote for credit unions. I joined one about 30 years ago, and haven't regretted it once. There's something to be said for being treated like a human being.

According to Suze Orman, the current advice is NOT to pay credit cards in full each month - but to may only the minimum. Otherwise, they might cancel the account.

as someone just commented, citi is evil. agreed. but i urge you to CALL them and tell them you think their practice stinks. and that your many thousands of readers will certain hear all about their stupidity, greed, and intransigence--OR their benevolence, should they change their tune about the $3.08. it'd be their call.

that said, i think i would be highly tempted to overpay the bill and then let the credit drag out for months.

Oh, kenju, Orman has drunk the corporate Kool Aid on credit.

Crabby Old Lady, and only Crabby, will decide how she handles her credit and personal finances, not a TV host or a giant bank that helped sink the world and now needs credit from Crabby and other taxpayers.

With a credit score in the mid-700s, they can't hurt Crabby - they can only annoy and infuriate her.

Let them cancel and let someone try to have it affect Crabby's credit score. Now THAT's a public fight she would relish.

Wow! Hadn't heard this grand larceny story. Gives me second thoughts about using my Citi card which I just activated tonight 'cause the old one was expiring.

I did recently become aware of BofA raising the ante to 25% on a lot of their good credit card customers, but didn't mention it when I wrote about their curious offering to reduce mortgage interest rates.

I've been incensed for years, long before this economic situation, that state and national legislators have allowed usury rates to prevail for so many years. We really need to bring pressure to bear on those who represent us to act on our behalf.

I have had a similar situation,
and did this: if $3.06 is due,
pay $4.00 (or some amount you calculate will leave a positive credit balance)
and thus make them pay to send you
a statement each month to show
nothing due, and a postive balance.
After a few months of this,
you can close the account,
and make them pay again to send you a check for a few cents.

Suze Orman isn't the only that's bee drinking the "Korporate Kool Aid" ( I like that and wll use it) Seems to me as if Summers brewed it and gave it to Orman, Geithner and many TV news reporters. Maybe even Mr. OBama been sippin' a little too.

Naomi Klein has not been going at the Kool Aid and she's got some very important things to say about the current financial mess. You can google her or catch her at the Washington Post and the Huffington Post.

Yup, dear Cranky.....calling them will do no good, but you have to get your objections on record. They raised our interest rate from 7 to 14, then they made it retroactive. I cannot tell you how pissed we both were about that.

So please call.

I recently, somehow, overpaid Citi. Thought I'd just leave it there and intended to charge it away during the next period. Didn't happen. They quickly sent me a check for the amount.

We can't win with them, can we?

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