A year ago today, a very high balance transfer fee was 3% with no maximum limit. Many companies offered no fee balance transfers while most charged a 3% balance transfer fee with a $75 maximum. The days of low and no fee balance transfers are long gone now, and Bank of America recently raised balance transfer fees to 4%. Chase, perhaps wanting to one up the competition, recently sent notices informing consumers that Chase balance transfer fees will be raised to 5% in August.
Chase’s 5% balance transfer fee will be the highest in the credit card industry and could pave the way for other credit card companies to follow suit. However, the 5% balance transfer fee proposed by Chase may be less about squeezing a few more dollars out of consumers than it is about shutting down these transactions. If consumers are willing to pay these fees, and many undoubtedly would to escape 25% interest rates, Chase can significantly increase their upfront fee revenue. However, this may not be the reason for the increase.
Faced with a 5% fee, many consumers may opt not to use Chase for balance transfers, effectively limiting the bank’s exposure to these transactions. Thus, without actually ending balance transfers, Chase may succeed in scaring away consumers looking to utilize their credit cards for these transactions.
Chase’s decision to increase balance transfer fees to 5% comes only a few days after Discover CEO David Nelms stated he wanted to cut back on balance transfers “dramatically.” That banks clearly want to avoid low rate balance transfer transactions signals their continued fear of lending to consumers when 0% introductory rates are needed most.
An often overlooked cause of recent balance transfer fee reductions (as well as the shortening of 0% interest rate periods) can be found in the Credit Card Accountability Responsibility and Disclosure Act. This legislation designed to protect consumers has opened a Pandora’s box of unintended consequences by effectively (and fundamentally) changing the business model of credit card companies. These changes, coupled with crippling economic conditions, have threatened to undermine the present and future profitability of credit card lending.
Ultimately, banks will find a way to make money with credit cards again. However, as they raise fees and interest rates, it is consumers who will paying more at a time when we cannot afford it.
June 26th, 2009 at 9:31 am
I just got a notice from Chase stating an increase for the minimum payment from 2% to 5% of the ending balance on one of my accounts. This account was originally a balance transfer with Providian for a low fixed interest. The reason, current APRs and revolving balances. What the heck does that mean?
The account was originally from Providian, then went to WaMu and then was bought by Chase. I called and asked about my other cards but they haven’t been affected by this yet. Just the fixed low interest account. Imagine that! My credit is excellent as shown on my credit report but if the card companies keep doing things like this…well who knows what is going to happen. Any advice as to what I should or could do?
June 26th, 2009 at 4:21 pm
If the rate is really low, you might have no better option than to stick with the card. Although Chase seems to be the only bank raising minimum fees (and all the backlash may make them the only one to do so), there’s a chance other banks might follow suit. However, if you think you can repay the balance within a year or so, you may want to do a 0% balance transfer (while you still can). However, you’re best option may be to call, be as nice as possible, request a supervisor, and see if you can negotiate a better arrangement. Perhaps they will trade a percentage point on the APR for a percentage less in monthly payments.
June 26th, 2009 at 6:07 pm
Post says ” you’re best option may be to call, be as nice as possible, request a supervisor”….
I always get a laugh out of that, do people think your rate is determined by being as nice as possible?
There is a business formula, that will detirmine your rate, you might be able to get hung-up on, for being rude. But no, you can’t get a better rate for being polite or friendly or anyting as simple as that. change banks, or stop paying for your credit card, don’t go homless over an unsecured Credit card debt.
June 27th, 2009 at 12:34 pm
Bob,
The fact of the matter is simple: if there is any chance of getting your payment rate reduced, the person on the other end of the phone is the only one who can help. They get countless angry calls blaming them for something they had nothing to do with. And, while I agree they have limited ability to help, any chance a person has of getting help will be based on the willingness of the customer service supervisor. I’m not saying this is a solution, but it is a first line of offense.
July 3rd, 2009 at 12:22 pm
We can stand together and fight.
There are things that we can do and if others follow, will cause significant damage to these companies.
We are the consumers. Stop consuming or decrease the amount of consumption and the consumer can take charge. Just remember, companies really don’t care how much you complain just as long as you keep consuming. Stop consuming and companies fail.
Here are a few steps that we can take as consumers:
1. Close your credit card accounts. This will deny them future revenues.
2. Stop using credit cards when at all possible. Credit card companies make a substantial portion of their income from vendor fees. Everytime you use a credit card the vendor is charged approx. 2% of the transaction amount. Interest is not the only source of revenue.
3. Start making bi-weekly payments. I.E. If your new monlthly payment is $400.00, start sending $200.00 on the 15th and the 30th of each month.
This will substantially lower the amount of interest they will receive, pay off the card quicker and save you a large amount of interest. Apply this this to car loans, mortgages etc. (Some Mortgages will not accept partial payment). To understand how powerful this is, a 30 mortgage can be paid off in about 23 years.
4. Stop using traditional banks. Use credit unions. You can typically get better savings rates and loan rates.
Just try a one year non-consuming campaign and you will be suprised at how much money you can save. You will also find out that many of the things you thought you needed are no longer necessary.
Good luck in the fight.
July 3rd, 2009 at 12:35 pm
BD,
I like your spirit and I think you are right on a number of points. Everyone should analyze their personal consumption and eliminate the wasteful and unneccessary spending that has placed many of us in debt, and thus vulnerable to our credit card companies.
However, it is important to work within the system, and part of that is to maintain a good credit score. Unfortnately, that means utilizing credit cards and not hastily closing all accounts, as this can impact the price you pay on everything from mortgages to car insurance.
July 14th, 2009 at 12:03 am
Fight Chase Terrorism!
I’ve been a member of Chase Bank since they took over my account from 1st USA a few years ago. I had borrowed some 3.99%, 4.99% & 6.99% money for debt consolidation and transportation from both of them over the years. Never made a late or missed a payment.
Now I get this 2 to 5% minimum payment increase that will equal $700 a month for me after August 1, 2009! I’m unemployed & get only $1200 a month, my rent & other debts I must pay before food equal $700+, so paying this is totally impossible. Do they want people to default & ruin their credit? I struggled to get & keep good credit for years, now they want to wipe that out with a slip of paper that wasn’t even in an envelope or official stationary? This is extortion and financial terrorism!
I can pay the $280 a month I’ve been paying & believe in paying what I owe, but this increase is impossible! Besides bankruptcy, debt reduction & default, I need an alternative to this nerve racking situation now, before the deadline August 1st. I am willing to pay, but cannot under these new terms. Everyone should stop paying them! At this stage they can go ahead & ruin my credit. I’ll close my bank accounts, move & deal with cash from now on! Screw THEM! Some Obamanation this has turned into!
July 14th, 2009 at 11:18 am
Thus far, the only possible solution mentioned by visitors is speaking to the “hardship department.” While some visitors have mentioned difficulty in getting transferred to the hardship department, others have commented that they were able to reach a fair agreement. If you have issues with a customer service rep not connecting you, try asking for a supervisor or US representative. If that doesn’t work, call back until you get someone on the phone who can help.
August 23rd, 2009 at 9:36 pm
I have a copy of my 3.99% “until balance is paid off” and nowhere does it say that they can increase my minimum payment to 5%. I was offered a rate increase to 7.9% so it appears that they never intended to allow me to keep it. I bought my car on it figuring it was a better rate now my payment ballooned from $450 to over $1000. This is decetive business practices and I am taking it the Attorney General!!!
August 24th, 2009 at 11:14 am
Lee,
One of the biggest ommisions of the credit card bill is that the new laws do nothing to protect consumers from doubling or tripling monthly payment requirements. These increases have hurt so many people and are truly one of the most unfair practices banks have been engaging in. Unfortunately, it is probably legal, just as the other absurd things the banks have done.