J.P. Morgan Chase...will also start charging a new $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5% of their outstanding balance, from 2%... Chase's new monthly fees and higher minimum payments will mainly affect customers who have been carrying large balances on cards with low promotional rates for at least two years, says spokeswoman Stephanie Jacobson.
"The total number of customers is relatively low, but the balances that these customers carry amount to billions of unsecured debt," she says. While these customers cannot opt out of the new terms, she says, they can pay off their balances or maintain their current minimum payments in exchange for giving up their promotional rates. A higher rate, however, means that more of a customer's monthly payment goes for interest and less to repay the loan.
Choosing to Decline In some cases, cardholders may be able to decline the new terms -- although they'll typically have to close their account... Has anyone heard more details about this?
Interesting that they are targeting "life-of-balance" offer users who've played by the rules Chase set. Many FWFers will want to monitor this carefully.
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Chase Raises Minimum Payments, Adds Service Fee December 1st, 2008 by Kenneth Long
Chase has joined the growing list of credit card issuers struggling to find additional revenues in order to offset losses. These increases are expected to generate additional profits for the credit card issuer. The question is, will these changes actually increase losses by pushing more cardholders into default?
Interest Rate Increases
Chase is increasing the cash advance finance charge. The default rate has also been increased, which would only affect those cardholders that have been late on a payment, exceeded their credit limit, or otherwise given the cardholder reason to increase their rate to the default rate.
Minimum Payments Increasing
Some Chase cardholders will notice that their minimum payments will more than double. Instead of a minimum payment equal to 2% of their balance, it may increase to 5% of the balance.
These increases in the minimum payment will generally affect those cardholders that have been carrying large balances for at least 2 years. There is another potential cost also for these cardholders.
Monthly Service Fee
Some cardholders that have carried large balances for a couple of years or more will be charged a $10 service fee each month. While this may not sound like much for cardholders that carry high balances, an additional $120 a year in fees does add up.
Addressing the Changes
If you are a Chase cardholder, understand that there is a lot you can do to avoid these increases. Paying off your balance in full each month will of course eliminate all interest on the account.
According to Chase spokesperson Stephanie Jacobson, most changes will be felt by cardholders that have taken advantage of promotional rates in order to carry large balances over the course of at least 2 years.
Chase has suggested that you can keep your monthly payments at their current level if you agree to the interest rate increase. For cardholders with promotional rates below 5% APR, this could be a substantial increase in monthly finance charges.
On the other hand, trying to opt out of the changes would require that you give up use of the card. It is a tough option either way.
It is expected that credit card defaults will continue to rise as the economy deteriorates and credit markets freeze up. For those clients already teetering on the edge, this change could potentially push them toward insolvency.
DaveHanson said:While these customers cannot opt out of the new terms, she says, they can pay off their balances or maintain their current minimum payments in exchange for giving up their promotional rates. A higher rate, however, means that more of a customer's monthly payment goes for interest and less to repay the loan.
Choosing to Decline In some cases, cardholders may be able to decline the new terms -- although they'll typically have to close their account...
As long as cardholders can decline the new terms, its not really any more of a bombshell than any other CC change of terms we've seen recently.
Sure they will close the account, but issuers are going to be doing that to us anyways in the coming months.
SUCKISSTAPLES said:As long as cardholders can decline the new terms, its not really any more of a bombshell than any other CC change of terms we've seen recently.
I agree that opting out is a key element as to the significance of this, but I disagree that this is same-old same-old.
This is only the second report I've heard of active LOB users having terms changed like this absent a default of some kind. The first was Discover, who implemented a change of terms allowing increase of minimums to 4% (but added no fees). But AFAIK, this was never enforced. It certainly hasn't been applied to this day on my 0% LOB offer.
If anyone has verified reports to the contrary, please post.
And if you use your oldest cards for these offers, you will have to choose between the remaining offer and the effect on your credit. It's legalized extortion!
Creditboards has been discussing this for a few days. They are NOT letting people opt-out and keep their rate (they were letting some people that called in get 7.99% with no fee and no minimum payment increase). Some people have been sending their own opt-out notices in by certified mail to attempt to preserve their rights. This may end up in a class action suit. HSBC has traditionally been the largest issuer I know that has refused opting-out for contract changes......BOA Citi, and Chase have bee good about letting you opt out.. (if you get the notice in time and actually read it).....
talljay said:And if you use your oldest cards for these offers, you will have to choose between the remaining offer and the effect on your credit. It's legalized extortion!
Well, I bet the fees won't apply if you pay off the balance. Therefore, you could probably just pay off the balance and not close your account.
I don't think you have to opt out. The terms are the terms you agreed to. Now one of those terms might be that if you use your card at any point, you're agreeing to the new terms. If you're like me and transfer a balance but never actually use the card again after that, they can't just change the contract retrospectively on you.
TheSaint said:talljay said:And if you use your oldest cards for these offers, you will have to choose between the remaining offer and the effect on your credit. It's legalized extortion!
Well, I bet the fees won't apply if you pay off the balance. Therefore, you could probably just pay off the balance and not close your account.
Of course you can pay it off. You are a money losing customer and that is unacceptable. You took advantage of an offer that was created to trap people into paying fees and high rates without realizing it. But since you saw through our little plan, you must go.
So pick your poison, keep the great deal for now and we'll screw up your credit later OR pay us back now and you can keep your credit score. They've got you by the credit card cajones.
rooms222 said:Creditboards has been discussing this for a few days. They are NOT letting people opt-out and keep their rate (they were letting some people that called in get 7.99% with no fee and no minimum payment increase). Some people have been sending their own opt-out notices in by certified mail to attempt to preserve their rights. This may end up in a class action suit. HSBC has traditionally been the largest issuer I know that has refused opting-out for contract changes......BOA Citi, and Chase have bee good about letting you opt out.. (if you get the notice in time and actually read it).....
That would be interesting because I don't recall any change in the law that would prevent you from declining the changes, closing the account, continue paying offing off as originally agreed, and taking the hit on the utilization factor on the credit reports.
With interest rates steadily dropping and fees climbing, the float game isn't what it used to be. So let Chase go ahead and spend their resources shutting down what's already become a marginal program.
Message edited by: RedCobra on 2008-11-20 19:50:53 CST
Interesting timing.. I noticed one of my payments dropped huge when I charged a small purchase to a 0% BT card, in which the purchased incurred interest at the standard rate, the payment dropped to "1% plus finance charges" instead of the old 3%. Nice loophole for those who are scared of the 5%, 4% and 3.5% I've been hearing about.
Anyways this is a good move for JPM.. I noticed they are beating citi in mortgage rates today, and are set to dictate mortgages from here on. Doesnt look good for the homebuyer crowd.
Message edited by: PolarDude on 2008-11-20 23:11:40 CST
heathiopian said:If you're like me and transfer a balance but never actually use the card again after that, they can't just change the contract retrospectively on you.Umm, that is exactly what Chase is going to do.
PolarDude said:Interesting timing.. I noticed one of my payments dropped huge when I charged a small purchase to a 0% BT card, in which the purchased incurred interest at the standard rate, the payment dropped to "1% plus finance charges" instead of the old 3%. Nice loophole for those who are scared of the 5%, 4% and 3.5% I've been hearing about.
That is really interesting. I'd love to hear more data points about this (I have a large balance at 2.99 for life, and if I can cut my payments in half by buying a stick of gum next month, that's a heck of a deal).
PolarDude said:Interesting timing.. I noticed one of my payments dropped huge when I charged a small purchase to a 0% BT card, in which the purchased incurred interest at the standard rate, the payment dropped to "1% plus finance charges" instead of the old 3%. Nice loophole for those who are scared of the 5%, 4% and 3.5% I've been hearing about. That's a good point PD. Purposely inflicting yourself with a little bit of finance charge has been noodled around with before as a way to keep yourself from being flagged as a "deadbeat", but it could have a very specific application to prevent Chase from douching you.
PolarDude said:Interesting timing.. I noticed one of my payments dropped huge when I charged a small purchase to a 0% BT card, in which the purchased incurred interest at the standard rate, the payment dropped to "1% plus finance charges" instead of the old 3%. Nice loophole for those who are scared of the 5%, 4% and 3.5% I've been hearing about. PD, was this a chase card that switched from 3% to 1% + charges?
All my Chase cards have always been 2%, no more no less.
Would love to see confirmation that Chase will alter its minimums based on purchases made.
cmatthes1 said:Actually if "opt out" = cancel your credit card. Doesn't cancel your credit card = pay us all the money now?
No,
An oversimplified explanation.
You have a contractual agreement with Chase that describes the finance charges and repayment terms. Chase wishes to modify those terms. You have the option of agreeing to those changes or rejecting those changes. Period.
Now, your current agreement will include a clause that states that the issuer can close your account at any time for any reason. They can close your account whenever they like, but you are still required to repay the balance per the previously agreed to terms.
Historically, a typical credit card issuer will respond to your rejection of the modification of terms by exercising their right to close your account. They may also respond by reducing your available credit, but closing your account was the typical response.
Nothing in your agreement (at least all the ones I've read), can permit them to demand immediate repayment of the balance without a valid reason (e.g. you just filed for bankruptcy or you haven't made a payment in 4 months)
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