My Credit Card Company Raised My Interest Rate…WHY?!?!

FOR IMMEDIATE RELEASE
Los Angeles, California, United States of America (Free-Press-Release.com) September 21, 2011 -- Recently, I received a notice in the mail saying that the interest rate on one of my credit cards was being raised starting on November 1st. This was quite a shock to me, considering I’ve had a very good and stable credit history ever since I had access to credit. And while some people may just get upset about it and move on, I decided to try and do something about it.

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My Credit Card Company Raised My Interest Rate…WHY?!?!

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The letter I received was from US Bank. I’ve had a credit card with them for about two years or so now. In the letter, they stated that as of November 1st, my APR will be going up a whopping 7%, from 10.99% to 17.99%. As I stated before, my first reaction was utter shock. Then came confusion, then anger. My credit card interest rate was going up? But I have very good credit, and have never been a poor credit risk. I didn’t know how they could justify this huge change.

To give you some background on my credit history: I recently turned 30, but I’ve had access to credit ever since I was 17. My mother opened up a credit card for me that was linked to her account, and that credit card allowed me to build up credit, with my mother ultimately responsible for making sure the payments were made on time. I used that card for a year or so but after I was 18 I decided to get my own separate account with the same bank shortly afterward. I made all my payments in full and on time, and continued to do so for years after that. I had department store credit cards as well; those too were always paid on time and in full. I acquired other credit cards later, and again the same thing — all bills were paid on time and in full.

Around age 20 I purchased a car using a car loan I obtained on my own with no cosigner. At age 24 the car loan was paid off in full, never having paid late once. I had a decent job at age 25, and I still lived at my parent’s house. At that time I purchased a brand new, much more expensive car than the car I previously purchased. That too was financed with a car loan I obtained with no cosigner. I still have that car, and in the first half of 2012, the car will be paid off in full. Again, I never paid late once. I have had my own apartment for over three years now, and have never been late on rent. At the moment I currently have five credit cards, and almost everything I purchase is charged on those cards.
Given the fact that I moved three years ago cross country to work on a start-up company, my income isn’t near what it was. The market crash of 2008 also took its toll on me. But even then I continued to pay my credit cards on time…but unlike before, this time I wasn’t paying the bills off in full. I usually paid double the minimum payment, but always paid the minimum at the very least. To date I still have somewhat high balances on most of the cards, but they’re still being paid on time.

So as you can see, while I’m not in as comfortable a financial position as I once was, I’ve always been responsible when it comes to my credit. With timely rent, car loan, and credit card payments for 13 years straight, you can probably see why I was pretty upset and perplexed at the rate increase US Bank hit me with. Here was their reasoning in the letter they sent me: (these are verbatim from the letter):

-- Proportion of balances to credit limits is too high on back revolving or other revolving accounts
-- Amount owed on revolving accounts is too high
-- Too many inquiries in the last 12 months
-- Length of credit history too short

These bullet points seemed to me like they’re generic reasons they slap on all letters like this that are sent to cardholders. In any case, let me break down the bullet points, starting with the first two. I admit that currently my credit utilization ratio (ratio of credit being used to your total available credit) is a bit high, and has been for a couple of years now, yet I’ve continued to pay all my bills on time. And actually, my credit utilization ratio is lower than it was a year ago. Now many of you may be thinking “Well, that’s the reason why they raised your rates.” However, the reason I’m confused is the fact that I have two other credit cards with another bank, and my utilization on those cards has been higher for longer than my US Bank credit card, yet that bank has not touched my interest rate at all since I’ve had the cards. Furthermore, the interest rates on those other cards are in the single digits — nowhere near the almost 20% APR US Bank wants to charge me.

The last two bullet points are mostly the reason why I feel that the letter is just a generic one sent to justify their actions, because I don’t feel they really apply to me. I haven’t been looking for a new credit card for almost two years now, I haven’t moved to a new apartment, I haven’t purchased a new car, and I haven’t taken a loan out of any kind — so how can I have too many inquiries on my credit? Secondly, as I said earlier, I’ve built up a credit history for 13 years now, while using a credit card every chance I could, so there is no way the length of my credit history is too short. But there was a big question still haunting me — why was US Bank doing this to me when my other credit card companies weren’t?

Well for one, different banks have different exposure when it comes to their credit card accounts. Some banks may have concentrations of customers in areas of the country that are doing worse economically than other areas. Other banks may take on more subprime customers than another bank. Because of these varying risks, one credit card company may feel you are more of a risk than another card company. Most of these decisions on a consumer’s creditworthiness are made using computer models. I think my case highlights the fact that while computer models are good to use, sometimes there are unique cases (such as mine) that should be allowed to be reviewed individually by an actual person.

Regardless of that reasoning, I was still upset and still felt that my APR was being raised unfairly. I decided to immediately give a call to US Bank to see if I could get a better explanation. When I finally was able to speak to a customer service representative, I explained that I was rather confused, and informed him of my impeccable credit history and my other cards with lower interest rates that were never raised. He replied by saying he would be “up-front” with me and explained that “they feel that your account isn’t profitable enough.” I’ve been paying interest on a pretty decent-sized balance for well over a year, while also using the card from time to time. I always pay on time… how is that not profitable enough for them? Not only are they getting interest payments from me, but they’re also getting swipe fees from merchants every time I use the card.

Another point I made was that while my interest rate would be going up on November 1st, any purchases made prior would still be at the original APR. So, if I don’t use my credit card starting on November 1st, they won’t be getting any extra money out of me anyway. Furthermore, if I do decide to use the card after November 1st, if the amount I pay over the minimum payment is greater than or equal to what I charge in a given month while at the higher APR, because of the CARD Act, that payment goes directly to paying off the higher APR charges first — that means they can’t get any extra out of me that way either.

I was so incensed at the whole situation that I decided to go a route that I think that many people might find a little unusual — I filed a formal complaint with the Better Business Bureau. Sure, I could have filed a complaint with the Consumer Financial Protection Bureau (CFPB), since they are now accepting credit card complaints, but as they are still trying to get everything organized over there, I thought the BBB was a better first option. I don’t know how it will turn out, but I’ll be sure to update this article when I get a reply.

More information can be found online at http://www.TheCrediteer.com

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