Wells Fargo is jacking up its credit card rates.
The Credit Card Accountability Responsibility and Disclosure Act (CARD), which was passed by Congress earlier this year, will limit how credit card companies can raise interest rates on consumers when the second part of the legislation takes effect next year. But before that can happen at least one bank has chosen to increase consumers’ rates in a step many feel is in response to the new law.
Last week Wells Fargo announced that it would be raising the rates on many of its customers by 3 percent, but the company says the rate change is not a reaction to the legislation.
“This is something we’ve been contemplating for quite a period of time,” Kevin Rhein, head of card services for the bank told Bloomberg, following the announcement.
This at a time when interest rates are at or near near zero.
Rates on three- and six-month bills have been below 1 percent for months, reflecting a campaign by the Federal Reserve to push down short-term borrowing costs in an effort to help the economy emerge from the longest recession since the 1930s.
Fed officials at their meeting last month left the federal funds rate, the interest that banks charge each other, at an all-time low of zero to 0.25 percent. The funds rate has been at that level since December.
Obviously, the best consumer advice anyone can heed is to just not use credit cards, or when you do, pay them off. Easier said than done for a lot of folks during bad economic times.
If you want to understand the populist outrage that exists in this country, the financial sector is a good place to start looking. Whether Wells Fargo is acting ahead of new laws or not, it’s acting directly ahead of the Christmas shopping season. That can’t be good for retailers.
It’s not the responsibility of ordinary consumers who play by the rules to help gigantic banks gain profits to offset the financial calamity caused by the housing bubble or the absorption of failed institutions. I’ve never cut up a credit card and mailed it back to a bank, it’s easier to just not use it. Sure, consumers are sometimes pretty much forced to have a credit card when renting a car or hotel room, but other than that, cash will do.
I still don’t understand why there seems to be little questioning of the right of big banks to pay incredibly crappy interest rates to regular depositors, yet charge consumers multiples of 10 or twenty times that interest rate. Then they tack on fees that more than negate any interest rates they pay to regular folks. But I guess you need an MBA to understand why this is good for business, because it seems to be good for only one set of businesses, and that would be the big banks.
Sure, banks should make some money on the interest rate differential, but wouldn’t logic dictate it be more like five percent or something? Would ten percent be enough? I mean, it’s all gravy, they get the gravy for being big and being a bank and getting to borrow money for free.
Where’s the gravy for the little people? I would please like to borrow eleventy trillion dollars at zero percent, and then I will be a big bank and I will charge people five percent interest, and I will be rich beyond my wildest dreams. I’ll even throw in free toaster ovens, maybe some calendars. The Fed knows where to find me, I’m sure.
Indeed. I think banks ARE in fact raising rates to get ahead of the new rules. The timing is horrible. If 70% of our economy is based on consumer spending and banks raise the rates to a point where no one will use credit, you can count on consumer spending to be modest. No economic recovery for you.
It isn’t just Wells Fargo though. AMEX raised it’s rates to 15% and people who have Barclay/Juniper cards have reported rate increases to 30% and these aren’t people who have bad credit, or who paid their cards late.
30%. WTF? Why not just use Guido the loan shark?
Credit unions charge about 8%
If banks can’t make a profit by paying you 1/2% on your savings and lending it to cardholders at 30%, we need new bankers.
I read last week that banks made nearly $35 billion from overdraft fees in 2008, an average of $264 for each of the 130 million checking accounts in the U.S.
@1 The oft-quoted 70% figure refers to “personal consumption expenditures. What this consists of is almost universally misunderstood. Calling it “consumer spending” is misleading because it includes things like Medicare spending by the government.
According to one commentator, “the portion of PCE which is both under the control of households and drives domestic production, is really quite smaller than 70% of the economy.” This commentator says “the money that people actually pull out of their paychecks and bank accounts to pay for domestically-produced goods and services drives about 40% of economic activity in this country ….”
The net result is that “the U.S. [economy] is nowhere near as dependent on consumer spending as people think[.]”
A 40% figure for personal spending by consumers makes more sense because wages are less than half of GDP and there’s no way that wage-dependent consumers would be able to sustain a GDP consumption rate of 70% in a tight-credit economy. Subtract personal savings from wages and you get a figure close to the 40% personal spending estimate, which does add up.
The implication of this is that economic recovery is less dependent on jobs and personal earnings than most people assume. In fact, the stock market sees a “recovery” already underway (i.e., GDP is growing again) and has bounced up 60% since March, even as unemployment continues to grow.
And that, my dear friends, is why I like stocks in companies that sell to other businesses and my portfolio is very light in retailers and consumer product manufacturers.
http://www.businessweek.com/th.....aight.html
I read somewhere that less than half of credit card holders carry balances on their cards. I’m one of those who pays off my credit card every month, and never pays any fees or interest. Don’t feel sorry for the banks just yet, though, because they make money even from people like me by charging merchants a fee every time I use my card. In fact, if every last cardholder in the country paid his or her balance in full every month, like I do, the credit card companies would still make a decent profit just from the usage fees. What you suckers out there pay them in interest charges and annual fees is frosting on their cake.
Here’s something to look out for, though. Having fucked up royally in the mortgage and credit derivative ends of their business, America’s bankers are looking for new sources of revenue, and the logical place to find it is in the pockets of customers who are still solvent. Some are already looking to extract more profit from customers like me by eliminating the “float,” that is, interest would start accruing the moment a merchant rings up a charge on your account.
If that happens to you, you should ditch that credit card immediately, and get one that charges interest only on the balance you carry over past the monthly statement date. If they all eliminate the float, I’ll go back to paying cash for purchases. Screw ’em, I’m not gonna pay out-of-pocket to use a credit card, given that I’m already paying higher retail prices to cover the merchant fees. Why the hell should I — or anyone — be forced to pay at both ends of the candle? Fuck that!
Banks, having squandered trillions of dollars through bad management and excessive risk-taking, are looking for any money in your pockets or accounts they can lay their hands on. Expect them to be creative. Expect them to be devious. Don’t make any assumptions whatsoever that today’s terms and conditions, rates, and fees will remain static. They won’t, that’s guaranteed, bankers will look to YOU for new cash flows to bail them out and they’re going to be sneaky about it. Constantly review your account activity and stay on top of what you’re paying for banking services! Because the bankers are gonna gouge you in the coming months if they can; and paying attention and staying alert to new or higher fees and charges is your best defense.
First off, it’s pretty difficult for me to get too upset about rich people who are borrowing money. I’ve never had a credit card, probably never will — I pay cash for what I want, and if I don’t have the cash I don’t buy. (Funny how that works.) Try not living beyond your means, most people in this country used to do that forty years ago.
Second, I hear from people who have paid off their cards that it’ll screw up your credit score. And others tell me that when they close out their cards they get a series of fraudulent charges within hours of contacting the credit card company, which to my mind implies that at least some of the companies are corrupt or vulnerable to inside corruption. Sucks to be you!
Lookout RR, I had a card account closed by the issuer because I did not use it enough.
6, do you rent?
Banks are a bunch of homo’s.
homo’s are cool.
i love homo’s
let homo’s get married and put their unit wherever they want.
it’s cool to watch homo’s homo-ing.
Wells fargo is a homo-bankual.
they are cool.
let homo’s do whatever they want.
let banks do whatever they want.
free choice…by homo’s and banks.
So, are there any sentient beings on your planet, or just cranky trolls spouting irrelevancies?
re 9: Do the cool banker’s drink Homo Milk?
I used to be one of those people who paid off their card every month, but once I was laid off it became too much of a temptation to put some expenses on the cards. I’m working again now but I’ll be paying off my cards for a while yet. I can attest to to the crazy high interest and high fees being charged.
Then there are all of the games the banks are playing with their checking and savings customers.
You’d think the banks would be smarter. At some point they are going to be competing for new credit card, checking and savings customers. Most of the big banks have destroyed any sort of good reputation or brand they’ve built over the years. The banks are going to have to spend a lot of money replacing the customers they’ve lost when the decide the want new customers again. Most who’ve trashed their brand and reputation will never get it back again.
I joined the BECU several months ago and have been impressed as hell. No one is being forced to stay with Wells. There are lots of great credit unions out there. It’s up to us to educate ourselves and tell these bankers where to shove it.
“Forget all the caterwauling about spending cuts. At its heart this is a massive giveaway to the rich that does little to nothing for the poor.” — Danny Westneat in the fishwrapper about I-1033
I’m with “I Got Nuthin'” (above). I belong to both BECU and GHCU. My credit card rate has stayed well below the 8% rate since I’ve had it. The best democracy is one in which people vote with their feet. So ditch those big banks. Join a credit union, or even sign up with those smaller community banks around here. The big bankers need to know they’re not the only players in town, and the best way is for consumers to educate themselves and take their money somewhere else.
I see in today’s news that a Delta Airlines flight from Seattle to Atlanta had to make an unscheduled stop in Nashville so police could remove an “unruly” passenger who apparently was “subdued” by other passengers. The fishwrapper article said the subject began quoting Bible passages, but gave no other details, so you’ll have to use your imagination to fill in the blanks. Maybe he wanted to open the door and fly among the clouds like an angel. Maybe he’s one of those Bible-thumpers who doesn’t care if his actions might turn everyone else into angels, too.
@7 I didn’t say I don’t use my credit card. I charge every expense I can to it, in order to run up the reward points. What I said is that I get the credit card services and rewards for free, because I have a no-fee card that I pay in full every month so there’s never any interest charges.
@6 As I pointed out above, the credit card company makes money from my credit card charging merchants a fee every time I use it, and the cost of those fees is passed on to you and me by stores that tack it on to their shelf prices. So, don’t get so smug, because you’re helping pay for my credit card! Sucks to be you …
@12 “Then there are all of the games the banks are playing with their checking and savings customers.”
As a former WaMu customer now with Chase, I have “grandfathered” free checking, free bill paying, etc., that Chase claims I’ll be able to keep forever (or until they go under, whichever occurs first). If these promises aren’t kept, I’ll be gone! BECU is high on the list of banking institutions I would consider switching to.
You can count on Roger Rabbit, who was raised to be a Republican, to take maximum advantage of whatever freeloading opportunities are out there.
@15 I’m a big fan of credit unions, the socialistic alternative to investor-owned for-greed banks! My credit card (I have only one) was issued by a credit union. I have no idea what the interest rate is, because I have yet to pay any interest on it. Probably similar to yours, though.
Yeah, the way to operate is to never carry over a credit card balance, if you have the financial wherewithal to do so.
For big expenses, I have a HELOC that currently charges 3.0% … and that’s deductible mortgage interest. If I were to buy something expensive with a credit card, I’d write a HELOC check to pay the card as soon as the bill comes through.
Obviously, not everyone has the resources I’ve been fortunate enough to accumulate.
I’ll be able to keep forever (or until they go under, whichever occurs first)
(snark)I give them 10 years…..(/snark)
@12 You’re grossly overestimating how much the banks need our goodwill. Truth is, they don’t need it at all, which is why they alienate us with abandon. You see, the way it works is, they’ve got their greedy hands wrapped around the economy’s jugular and can skim money off the top of every financial transaction whether we like it or not. And that’s exactly what they do. The money they steal from their little retail customers like you and me is mere frosting on the cake. They make the real bucks off big institutional transactions like financing company buyouts or selling loans in multibillion-dollar batches. You aren’t even a pimple on the local branch manager’s ass, and if you leave for a credit union, he won’t even notice you’re gone.
@21 My, you’re an optimist. Does anyone really believe that under the weak-kneed Obama administration’s pissant banking regulation “reform,” bankers won’t resume their reckless trickery within 6 months?
@7 “Lookout RR, I had a card account closed by the issuer because I did not use it enough.”
And that’s a loss? Good riddance! I have one (1) credit card. I put every expense I can on it — gas, groceries, utility bills, you name it, I’d even pay taxes with it if they’d let me. This racks up points that gets me free merchandise like airline tickets, DVD players, a chain saw, a shiny new leather briefcase, etc. I don’t pay Dime One for these freebies, or for the numerous services I get from the credit card company. I want to say to those who carry high-interest balances and pay for all my freebies, thank you, thank you, thank you! I appreciate them giving me their money.
@20 “Obviously, not everyone has the resources I’ve been fortunate enough to accumulate.”
You don’t need resources. What you do with the money you have matters far more than how much you make. There are high earners who spend every dime on status symbols and end up owning nothing and owing plenty. Then there are low-paid public servants like me who aim for a 50% saving rate like the Chinese do and put it all into owning income-producing assets. I happen to like stocks because they consistently produce a higher total return than any other asset class, through thick and thin.
You don’t really have to own a house. That’s because houses aren’t good investments, popular lore to the contrary notwithstanding. Housing, in the aggregate, doesn’t appreciate long term; the nominal gains in dollar values merely reflect inflation. And the costs of ownership are high: High buying and selling costs, high taxes, high utility bills, expensive maintenance, etc. Houses are for living in, not investing in, and the only real advantage to owning as opposed to renting is that you don’t have a landlord breathing down your neck telling you what to do.
I’ve read countless stories over the years about ordinary people in ordinary jobs (cops, teachers, janitors, etc.) who became millionaires. You don’t have to be a stock market genius to do this. There are no stock market geniuses, anyway. The stock market is ruthless and has a relentless way of humbling self-worshipping stock wizards. All you need to know about stocks is they go up if the company is making more money and go down if the company loses money. There are only three things you need to know to escape wage slavery:
1. Own, not owe;
2. Save, not spend; and,
3. How compounding math works (i.e., reinvest gains).
That’s all there is to it. These are the rules. Everything else is bunk.
@12 “At some point they are going to be competing for new credit card, checking and savings customers.”
Just got an offer from Chase for $100 if I open a checking account.
– – –
Plenty of alternatives out there for credit cards. Americans just don’t seem to be very smart consumers.
@22
I’m just saying financial institutions have spent a lot of money and effort building a good name and a brand for themselves. Many have pissed all that effort away in a very short period of time.
Sure the banks make the big bucks off of the big deals, but to a certain extent they want the retail trade too. This is why they spent so much time building their brand and trying to attract new customers during the boom.
The amount a bank has to spend to get a new retail or credit card account is surprisingly high. This is why pissing off their customers and saying “good riddance” when those customers threaten to take their business elsewhere is so stupid.
@26
I’m really not surprised given how many customers they lost locally when they took over from WAMU. I’m told well over 1/4 of their customers left for another bank. (I’m one of them)
Though two of my cards have gone up (I’m lookin at youi, HSBC and Barclays), which is a non-issue since i don’t carry more than $300-500 of balances anyways, my cute little credit union cards (AlaskaUSA and Digital FCU) and my Big Evil Seafirst/Bank of America Card, have actually dropped their rates.
You heard that right. Dropped. All told me that because my credit score is good enough, they wouldn’t hike now, and BofA even volunteered that “It makes bad press to be that openly, you know, evil. Or to be that evil at all.”
I’m sure this sudden “conscience” might be part of an advertising campaign, but sheesh. I keep my BofA mostly because AlaskaUSA sits on deposited checks forever and because giving me Alaska Airlines miles for using my debit card is pure dead brilliant.
A handy option for some might be a prepaid credit card. You don’t need to have any kind of credit in order to get one. You only need to have some cash to put against the card.
You may need to pay some charges, naturally, however if you truly desire a credit card, and you are unable to get one anywhere else, this is possibly the best way to go.