Credit Card Bait & Switch

I have had a Chase Credit Card for about 11 years. I never used to use the thing, but had built up some obscene credit limit. I have a good FICO credit score. A couple of years ago, they were apparently out pushing these offers; I know this because of the slimy move they pulled this month and the internet sites filled with flabbergasted people. They sent me an offer: I could take a 2.99 percent APR loan on the card and the rate was good for the life of the card. I just had to make the minimum payment of 2 percent of the balance every month. I jumped on it, because I have been able to earn a higher rate of interest than that on a money market account attached to various commodities and Forex trading accounts I trade with. It was a great deal. A never-ending 3 percent interest loan.

There was probably typical fine-print that said, "We can change the terms whenever we want however we want," but I have no idea what that fine print was or if it really exists. Their offer was clear. 2.99 percent APR for the life of the loan -- until it was paid off. I have had this loan for a few years, and I never miss a payment, always pay a bit more than the minimum, but not too much more, because it has been free money.

Apparently they sent out notifications last month saying they were changing the terms. So I got a statement this month and the minimum payment had gone up from 2 percent of the balance to 5 percent, more than doubling the monthly payment. Apparently from what I am reading this is taking some people who were making their payments and putting them on the brink, or over the brink, of default.

That is one thing. The outrageous thing is that they are now levying what they call a $10 "service charge/finance charge" fee every month, as well. The card never had any fees. So this card now costs $120 a year -- never mind you can get cards with lower yearly fees that at least offer cash back or some benefit. They not only will be charging that $10 fee every month, but they will be charging interest on that fee at the higher rate, so it is a $120 yearly fee that accrues interest on top of your lower-rate balance which gets paid off first. They are effectively going back on the offer I agreed to, by steadily raising my effective interest rate that way. Call it what they want. They are trying to raise the rate on me in any way they can to go back on their deal.

It gets worse. From what I understand, when cards change terms, they typically allow you to "opt out." You continue to pay at the terms you agreed to, and then agree to close out the card when the balance is paid out. No dice with Chase. So I called and was told my options were to pay back the full loan and close my account (a credit card I have had for 11 years, so closing it will negatively impact my FICO score)... or I could agree to give up my 2.99 percent rate and accept a 7.99 percent rate until Jan/2011, and they would get rid of the $10 fee and keep the monthly payment down to 2 percent of the balance--but at more than twice the rate they had agreed to when I took the offer!

I wasn't irate and didn't argue, because I knew it wasn't going to get me anywhere, so I figured I'd just pay off the balance. And here is the KILLER. Even though my balance is going to be zero, they are still going to continue to charge me the $10 fee every month, or $120 a year. Mind you, I am the guy who DIDN'T DEFAULT ON ANY LOANS and has not shown himself to be a credit risk. I finally got a supervisor and although there is no bending on this, they have me bent over with my pants down and I have to decide between two options: 1) Pay off the balance and close the account and never do business with them again. But since that will impact my FICO score, because I am giving up a credit card with a $30,000 line on it that I have had for more than a decade, I have to decide if I am willing to forget the principle of it and accept the raise to the 7 percent rate until January, 2011, pay off the balance anyhow, and at least buy two years with no fees (and I won't use the card) and see if the environment changes. I won't be holding a balance on the card, but judging by message boards I was reading, a lot of people can't afford to pay off their balances, so they will be if they stay with Chase. My question is, if they can reneg on their deal the way they did, now that they are promising 7.99 percent for at least the next two years, why should anyone trust that they won't unilaterally change the terms again before January, 2011?

I'm kind of taken aback by this. Chase is getting billions in bail out money. And apparently the decision is that these deals they were begging people with good credit to take a few years ago are not profitable anymore. So they are strong-arming those customers--many long-term customers--like they are loan sharks and trying to get them to stop doing business with the company. They'd rather collect the government $$ and concentrate on customers who are bad credit risks and squeeze out anyone who used one of these deals intelligently.

Either way, no matter what the fine print, this really is as close to a bait and switch as you can get. I am wondering how long before there is a class action law suit.

I'll probably end up keeping my Chase card after I accept the higher rate and no fee, and never use it, because it is an established source of credit that will impact my score. I'm pissed, but I am going to end up being prudent. But they lost any future business from me. Hopefully that includes others, too.

 

That is the thing, DD. No slip-ups. They made me an offer. I took it. Maybe they were counting on me to run up other charges at a higher interest rate to offset the 2.99. But I never did. I just let a balance sit on the card and arbitraged it. I was getting a higher rate of return on the money they loaned me than I was paying them in interest. But I never slipped up. I made every payment on time -- not just to them, but to anyone I do business with. I have never missed a payment, been late, etc. They just unilaterally decided to squeeze out customers like me. They made a bad offer and are now punishing me for it. I can even almost understand trying to get out of a 2.99 percent loan for the life of the loan. But unilaterally starting to charg me a fee and interest on that fee to raise the rate--without any opt out clause--is pure loan shark tactics. I have to decide if I do what you said. Tell them to fuck themselves and close the account. It's just when you have a line of credit that large that you have had for more than a decade, you are screwing with your credit score when you give it up. It will negatively impact my FICO. It's unfair that they bent me over a barrel and will lower my FICO score, when I did nothing to deserve it, if I act out of principle.

 

Well, yes and no. To calm myself down, I have been looking at what I got out of this in close to three yaers. I sat with a spreadsheet and figured out that through various trading activities, I took their 3 percent interest loan and earned a little less than 8 percent on the loan over a little less than a three year period (it would have been ridiculously higher if I hadn't gotten slaughtered at the end of last year). That includes money being moved in and out of money market accounts and through commodities and currency trades. I turned their loan into a profit of around 4.8 percent annualized.

I'm just pissed at the way they have gone about it, and how even though I am just ready to pay down the balance, they are still going to levy a $10 monthly charge if I don't agree to a higher interest rate (and only for two years, before they can start charging the fee) to try to get me to close my account--I mean I have been a customer for 11 years. How can that be good for business, even from just a PR standpoint? Since I wasn't yelling or screaming, and was fairly reasonable, the supervisor and I had a brass tacks conversation without her BSing me the way the customer service person with the script was. Without saying it overtly, she did agree that since I use credit responsibility, I am not a customer they want, so they are trying to get me to walk.

 

There are a couple of internet sites filled with this. Apparently they hit as many as 500,000 people who had agreed to various deals of less than 6 percent interest for the life of their loans. Most of the people on these sites say they never missed payments, lived up to the terms. This month, some of them saw, for example, month payments of $300 go up to close to $800, plus an arbitrary $10 fee, and they can't afford it. They can't afford to pay down their balance, so their only choice is to agree to the higher interest rate in return for no fee and a higher interest rate, but a payment that is lower (and is more interest). It will be interesting to see how many people who had never missed a payment are suddenly forced to default because of this onerous change for them. I'd have figured the whole idea of bailing out JP Morgan Chase and reassessing the problems the industry had had would have been not to intentionally try to drive the good-paying customers into default, ya know?