$18K on one card and the interest is tripling

[Inkstain82]

You really think a jump by almost 19% to 29.9% is fair? 1 delinquent credit card in 8 no way justifies this. These people are not losing money if you do the calculations. There needs to be laws in place for this. Even at 11% is not a low interest either that they cannot make money from and recoup any losses due to any delinquent accounts. Just saying because it is "unsecured debt" shouldn't mean an open door to charge whatever you want.

Yes, I think it's absolutely fair.

If anyone disagrees, they can start their own credit-card company and offer better rates, thus sweeping up all the customers and making a killing.

The fact that no one seems interested in doing that should tell you I'm right.

[disneysteve]

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.

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.

[Inkstain82]

#2 is fair to me because the user knows (or at least should know) is that credit cards aren't based on individual underwriting. They are based on actuarial risk assessment.

It sure seems as if people want all the benefits of variable-rate debts (low rates when times are good), but none of the risk.

If you don't want the chance that the rate will rise without you being at fault, ask for a fixed rate on the debt when you open the account. You'll pay more in good times, but you won't have to worry about this happening.

I don't have a problem with it being outlawed. Variable rates on unsecured debt is risky stuff, and we are a country that has proven most of us can't handle debt. But I don't think it's wrong of the credit card companies to offer it until then.

[disneysteve]

But I don't think it's wrong of the credit card companies to offer it until then.

Legally, it isn't wrong for them to do it. That's my problem. It should be illegal. Or it should be more like a HELOC where the rate is variable but there is an annual cap on rate increases so that nobody will ever see a 20% rate jump at one time.

[paymydebt]

I agree there should be an annual cap on the rate so no one sees big jumps all at once. Why causing further hardships for people which will result in more delinquent accounts. And I definitely don't believe citi is justified in raising their interest rate by a whopping 19% at once and if enough people complain maybe can get a law in place to prevent this in the future.

[lenbevy]

Two pieces of advice - first run a budget. then get payofflive dot com - their service is great and will help you understand how long it will take you to get out of debt and even tell you how much to pay and when to pay it.

once you have figured some things out, call your credit company and see if they can help you out by lowering the rate or negotiating the balance.

[davecc]

I hope you can get out of that. I think you should consider a career change or maybe getting a second job, temporarily. Good luck!

[Radiance]

If it's an option, you might consider consolidating the debt onto a lower interest card, or bank loan.

Thas is what I did! I took a personal bank loan with the purpose of debt consolidation, they gave me 12% at 6 years to pay, no pre pay penalties.

I did it through my credit union. Give your bank or your local credit union a call and see what they can do.

Most importantly, is your current budget setup so you won't need to use your credit cards anymore?

All the best!

And, guys?, the conversation on whether the banks should be allowed to do this or that sounds like highjacking addicted.to.music's post. I think it is or should be covered somewhere else... just my two cents.

[wnlbutterfly]

The main problem with Inkstains theory about when times are tough then the risk is higher to credit card companies is that knowing a lot of people are struggling right now and then increase the rates, which I assume will also increase their payments (if not then the balance is going to start ballooning), is that you are risking having even MORE customers default, just as KG101 is suggesting.

We haven't had any interest hikes because our credit cards were already crazy high. Making progress on paying them off though.