As credit card companies put the squeeze on, consumers fight back
When TV production consultant Nicole Dunn opened her February credit card statement from issuer Capital One last month, she was surprised to see that her interest rate was going up - and not by just a little. Her former 12% rate was getting hiked to a stiff 22.99%. What made it all the more galling, Dunn says, is that she was a good customer. She'd had the card for seven years and had never been late with or missed a payment.When she called the issuer to get come answers, things didn't get much better. "The customer service agent said, 'They did the same thing to me, and I work for them!' ," she recalls. The agent also told her Capital One had sent out notices in October telling customers their rates would be increased. But Dunn says she never expected that increase to be a near-doubling of her rate. She wrote a letter to Capital Onefounder and CEO Richard Fairbank, after which a representative from the issuer's executive customer service department called her.
Dunn was offered the option of closing her account and paying off the balance at the old rate, but they wouldn't budge when it came to the exorbitant interest rate. According to Dunn, the customer service rep said, "We're trying to reduce the debt we've accumulated, and the only way to do that is to raise the rates."
"I'm not going to pay for your mistakes," Dunn replied. She paid off the $400 balance that remained on the account and cut up the card.
Consumers Fight Back by Cutting Up Their Cards
In December, we wrote about comScore data that indicated that Americans were getting fed up with the way they were being treated by credit card companies. Many were canceling cards or transferring balances to cards with less draconian rules and friendlier terms.
According to a report by J.D. Power and Associates. The percentage of consumers last year who said they planned to switch credit cards in 2010 rose from 12% in 2008's surveyto nearly 15%. An overwhelming number of customers said they would switch because of higher interest rates, larger fees and unfavorable terms. Nearly half -- 48.4% -- of all respondents said they'd be switching cards because of an interest rate hike. Fees were yet another big catalyst. In 2008, 10.9% of consumers said they planned to replace a credit card to avoid high fees; last year, that percentage more than doubled, jumping to 28.4%.
Marcia Noyes, a public relations and marketing manager for a health care tech company, severed a 13-year relationship with Home Depot after they recently did away with interest- and payment-free promotional offers on their cards. While the no-interest programs remain in place, Noyes says the notice she received advised her that a monthly payment would now be required. For Noyes, who preferred to save up the amount she owed on the card until shortly before the due date so she, not the company, would benefit from the interest, that change was a deal breaker.
"I cut up my card for the principal of it and sent a letter saying they can take their card back and shove it," she says. Noyes, who describes herself as a good customer, says she's striking a blow for all the consumers who have no choice but to stay with their card companies because they're paying down a big balance or can't get another card. "This is how I look at it. If enough people who do have good credit fight back, maybe they'll sit up and take notice," Noyes says.
Debra Shrider, a freelance writer and single mom, cut up her Dress Barn credit card after she got a letter at the beginning of the year saying she'd be automatically charged a dollar for every paper statement unless she called them and volunteered to get her bill by email only. Although Shrider says she typically pays her bills online, the paper statements help her stay on track. "Computers go down, the internet does go down, and I can't afford any late payments or penalties right now. You have to watch every penny," she says.
Jan Fabro, a public relations professional, missed a payment on her Bank of America MasterCard last month. "It was my mistake," she admits, a simple error of not confirming the payment after setting it up. She was unaware of the lapse until she went to use the card to make a charitable donation - and found her account frozen. When she called customer service, she was told that her Bank of America MasterCardhad been frozen since the due date and would remain that way until her payment went through. The rep said the bank could make no exception for Fabro, despite her fifteen-year history of on-time payments on that card.
To make matters worse, this occurred over a weekend so Bank of America wouldn't unfreeze her card until the new workweek - despite the fact that her account was back in good standing. To Fabro, this was a case of the punishment not fitting the crime. Bank of America's inflexibility, she says, led her to cancel not only that credit card, but to start shopping around all three of the bank accounts as well as the home mortgage she has with them. "I just felt like they didn't care, and I deserved better," says Fabro.