Consumer Law

Banks Are Increasing Credit Card Rates & Fees and Pushing Lousy Products to Make Up for Mortgage Related Losses

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

In an interview on NPR's Fresh Air with Terry Gross, Prof Elizabeth Warren warns consumers that banks are increasing interest rates and fees on credit cards for no other reason other than that they need revenue to make up for losses in other lines of their business. The banks reason that in a climate in which credit is harder to obtain, consumers are less likely to close their accounts when hit with these increases and switch to different credit cards. Banks are also adding such "trips and traps" as double cycle billing (you pay interest on recent charges).

Banks are also pushing credit related products that Prof Warren calls lousy. An example is credit insurance on your credit card, which kicks in if you lose your job. Many buyers will be misled into believing the insurance pays off their balances, but instead the insurance merely pays the interest for six months. At $20 per month on, say a $5,000 balance, this is a bad deal for the consumer.

Prof Warren is a law professor at the Harvard Law School and a leading critic of banks' predatory lending practices. The interview is available as a podcast on NPR's website, www.npr.org.

Full post as published by California Credit Law Blog on July 05, 2008 (boomark / email).