Card Tricks

Everyone has a special credit card memory. Mine involved coming into possession of a Discover card some time back.

I think some telemarketer misunderstood me saying "go away" for "OK" and it arrived unsolicited in the mail. I never used it, didn't want it, yet I was hit with a service charge for simply having it in my possession. If I didn't pay the charge, my credit rating suffered.

Getting rid of that card was harder than ordering prime rib at a PETA convention. It took months, but I eventually got it out of my life. My experience was exasperating. Others get caught in a squeeze that is life altering.

At a recent congressional hearing on credit card reform, Wesley Wannemacher, a Lima, Ohio resident, gave testimony that sheds light on shady practices.

Wannemacher described how he had maxed out his $3,000 Chase Bank card to pay for his wedding, then found himself falling further behind in payments. Despite pleas to Chase to work with him, the bank continued to pile on late fees and penalty fees, according to published reports.

Eventually, Wannemacher ended up owing $7,500 in interest fees, late payment fees, and overlimit fees on an original debt of $3,200. Even after making payments totaling $6,300, he still owed $4,400 in fees.
You might get a better deal down on the corner from Fat Tony the Loan Shark.

The credit card industry seems to get more predatory in its practices with each passing day.

They begin by targeting young people. You don't need to be a sleuth to figure it out. My two daughters, now both grown, continue to get dozens of credit card offers a year in the mail, a practice that started when they were in college, had no extensive work experience and no steady income.

In fact, a 2005 report done by Nellie Mae, the student lender, found that: 76% of undergraduates had a credit card but only 21% of college students with credit cards paid them off each month. Talk about hooking them young.

Then it gets worse.

A recent GAO report said that while credit was available to a wider range of consumers than ever before, fees for late payments and overlimit charges had doubled from 1995 to 2005, and that cardholders experienced rate increases to as much as 30 percent interest for missing a payment.

Worse, it is not uncommon for companies to charge interest and fees on money that has already been repaid.

Of course, the fee schedule is all spelled out for us.

My Capital One bill clearly states: "If the code P (Quarterly Prime), L (Quarterly LIPOR), C (Quarterly CD) or S (Banlcard Prime) appears on the front of this statement next to the periodic rates(s), the periodic rates and corrresponding annual percentage rates may vary quarterly and may increase or decrease based on the stated indices as found in the Wall Street Journal plus the margin previously disclosed to you..."

What's in your wallet? Jibberish, that's what.

The government has already taken some action regarding the credit card industry.

They passed the Bankruptcy Abuse Prevention and Consumer Protection Act which actually makes some consumers more vulnerable to credit card companies looking to make money off late fees and less capable of seeking protection in bankruptcy court.

Now it's time to realize that it's the consumer, not the industry, who needs help.

Those recent congressional hearings brought promises from credit card issuers that they would ease penalties and simplify disclosures that few card holders read.

In other words, the fox promised not to go near the hen house again. But at least it was a start.
Congress now needs to assure that those promises are kept. And we, in turn, need to make sure Congress does its job.

After all, there are more than 640 million credit cards in circulation.
That's a lot of votes.