Quote:
Originally Posted by Inkstain82
I hear this sentiment quite a bit, and it's completely unfair.
Unsecured debt is priced to risk, and the risk in bad economic times is enormous.
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I think there are two different issues that get lumped together here.
1. Credit card user has his rate hiked because he, personally, did something wrong or saw a change in his circumstances. Perhaps he made a late payment, overdrew his account or did something else that caused a significant drop in his FICO score.
2. Credit card user has his rate hiked despite doing absolutely nothing wrong. He makes every payment on time. He has never been late. He never charges over his limit and he maintains a decent credit score. His rate gets hiked because of things other borrowers have done because the company feels they need to pass on the losses from other customers to the customers who are still in good standing.
In scenario one, the rate increase makes sense. In scenario two, it doesn't. How can you argue that it is fair to user #2 to penalize him and jack up his rate based on what others have done? I have to disagree with that being fair or appropriate and I don't even think it should be legal.
I've also said before that there is a big difference between raising the rate on new purchases and raising the rate on existing balances.