Chase Hiked Credit Card Interest Rates: Now What?

Here's a good question from a reader experiencing a rate hike:

My wife and I have two credit cards with Chase. We had a business card that we  "opted out" of paying a higher interest rate by effectively closing the account and then being told that for any reason they could increase the interest rate that ended up staying at 17%. The reason for increasing the rate was largely due to making payments late, according to Chase. We always pay on time, never late. That was our argument and then we were told other reasons for the increase in the rate. We have had this account for about two years. We are financially able to pay $8500.00 of the current $10,000 that is on the card and would like to pay it off and get out of this debt with Chase. From what I have read, should we close this card using the proper form for closing an account? Will it hurt our credit rating if we close it?

Also, we have another Chase card that was a rollover from another card. We just paid off the card that had a balance of $1500.00.

So, after we pay the $8500.00 on the other Chase card, would we be better off paying down the balance on the card and keeping the above card that had $1500.00 on it open? The business card was closed after we chose to opt out of the higher interest rate. We were told we could no longer use the card but could continue to pay it down with the 17% interest rate.

We are very frustrated with Chase and the way they have treated us. We both have excellent credit and we have learned that Chase has a reputation of increasing their interest rates to the extreme according to many web sites that have cardholders telling stories about Chase and their experiences with Chase. We do not want to hurt our credit rating either.

It sounds like you have been hit with one of those all-too-common Universal Default clauses. If I understand your email correctly, you will pay the business card with the $10,000 balance down to $1500 and the interest rate remaining will be 17%. It sounds like a good move to pay that off if you have the available funds since the interest rate is definitely steep. It sounds like your question is whether you should then officially close that account.

Have you checked your credit reports yet? It sounds like you already closed that account so it may already be reported as closed on your credit report. If that’s the case, there is nothing you need to do. If it is not listed as closed, I would leave it alone. A closed account with a balance can be a negative for your credit score. You made a smart move, moneywise, to close it so the interest rate wouldn’t go up. But as far as your credit is concerned, it’s better to leave an account open if possible. That's especially true if you have a balance.

It also sounds like you are going to have another Chase account that has been paid off and you want to know whether to close that account. Again, as far as your credit scores go, it’s better to leave it alone (read here to learn why) unless Chase is charging you an annual fee that it won’t waive. Even if you don’t use the card to make purchases, you can use it as leverage to negotiate a better deal with another card issuer that may charge you a higher rate. In other words, if you have other cards with balances, you can call the other issuers and ask for a better rate or tell them you’ll move your balance over to the Chase card (the one that will now have a zero balance).

Have you checked your credit scores? If they are decent, I would recommend you shop for a new low-rate business credit card. (You may want to wait until after you pay down the card with the high balance and the new balance shows up on your credit report to see where your credit stands, or sign up for credit monitoring). You can use it to transfer the balance away from the Chase card that is charging 17%. You can find business credit card ratings and offers here.

Let us know how things turn out!

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

Comments

[Mark]

very nice! thank you

[J Neal]

I am having a problem understanding my chase AARP credit card statement. I have two rates on my card. I have a promotional rate and a purchase rate. I have made no purchases in some time and have been paying more than the minimum on the card each month and have not been late. My balance on the promtional rate is going down, but my purchase balance is steadily going up. I called chase,they said to not pay attention to the purcase balance as it is for bank use only. But I am paying the higher interest on the escalating balance. No help from Chase. Is this not illegal?

[Kathie]

I just opened my credit card statement and found that because I paid my chase credit card payment early on the 3rd of Sept instead of closer to the 26th of Sept when it is actually due that they raised my credit rating from a promotional 2.99% way up to 18.99% which it has never been that high previously. Can they do this? Is this legal? I am getting rid of this one immediately!!!!!

[Gerri]

Something isn't right here. Paying late may result in a higher rate but paying early doesn't. Please call them and let me know what they say.

[Gerri]

J Neal -- you caught one of the credit card company tricks. They apply your payment to your lowest rate balance first and let the higher rate balance sit there racking up interest.

The customer rep did not give you good advice to just "ignore" it as internal stuff. It costs you money and you have every right to ask about it.

This is one of the practices that would be addressed by the Credit Card Holder Bill of Rights. Tell your Congressional Representative and Senators you support it. And let AARP know how you feel about it to. (You can weigh in on Consumer Actions website at:
http://capwiz.com/consumeraction/home/

[ACV]

I have a Chase credit card account with a balance I paid off over six months ago; currently resulting in a zero balance. Earlier this week I received an Important Notice of Change in Terms effective with my January 2009 Statement. The statement included the following
Summary of Changes:

• Your Overdraft Advance APR will be changed to a variable rate, currently 20.99%. This change only applies to overdraft advances on you Chase checking account, if applicable. (Not applicable because I do not have a Chase checking account, just a Chase credit card.)
• Your Default APR will be charged to a variable rate with a maximum APR of 29.99%.

What it means if you choose not to accept these APR changes:
• These APR changes will not apply.
• Your account will be closed and your card will no longer be available for use.

As a major bank who just received a sizeable billion dollar bailout by the federal government, this act by Chase is truly contemptible with some type of adverse action that needs to be taken against Chase. Gerri, would you suggest I choose not to accept these APR changes or keep the credit card account open so that my good credit rating remains? Thanks,

[DC7]

I've been a Chase cardholder sine 2003. I recently paid off a high balance of about $5000. Upon doing so, I received a notification that my credit limit was dropped from $22K to $1500. Then I received a statement of a $0 balance. My new % rate was now 58%! This is CRAZY! Is this legal. I refuse to use this card every again!

[Gerri]

Dc7 -- are you kidding!??!!!

I would love to see a copy of this notice. I'll send you a copy of one of my books if you'll send or fax the notice to me! Email me directly at gerri (the at sign) credit.com.

[Mary Lee]

I run a business as a sole proprietor and have several credit cards that were used to buy office equipment. I have NEVER been late on a payment with them or ANY other creditor, I ALWAYS pay at least double my payment due, sometimes up to 10 times the payment due! My average balance on these cards runs about 1/2 my limit.

In the last 6 months, I have started getting these small print try to hide notices of Change of Terms rate hikes that I am forced to decline to opt out of and then they close my account.

The problem with this is it is effecting my credit rating. I have gone from 720/730 to right at and in one case below the 700 line! I know this is due to the balance on closed cards, that I closed to prevent a gigantic rate hike! Apparently, this is becoming a common practice by credit card companies now. If they are going to keep this up, then the credit score people, need to stop weighing the debt/balance ratio so heavily.

If I go out to try to get more credit cards to increase this, then I am actively seeking credit, which again dings my credit score. I just can't win for losing here.

The fact that they are doing this after the bailout makes me so mad!

[Gerri]

Mary,

Please contact your Representative and Senators in Congress. They need to understand what taxpayers - who are providing the bailout money - are getting for their money!

Go to Senate.gov and House.gov for contact information.

Gerri

[Chase hiked my interest too...]

Hey, I'm one of the ones that got screwed on my interest rate. I received a letter on either Mon or Tuesday of this week with them saying I need to either not do anything (and my interest will be 14-15% interest) or I can cancel my credit card. Well, when I went to go apply at a local bank in my area to transfer the money from my Chase card to the local bank, she told me the only way they can do this is to do it in mass. Is this true? So are they doing this to all Chase card members? Or am I the only one. I have never had a late payment or anything and always keep my balance under the max. I have a really good credit score, too.

[MAP]

Gerri..I just received a "try and hide rate hike" letter to not do anything or stay with lower 9.24% versus new 16.24%...If I call to not accept they close my account. I will have a big balance on a closed acct. I am on SS retired and don't need this at this stage of my life. I also received one of their notices to sign if I do not want them to share info with their companies or other companies. I am thinking to mark"NO" on both so they cannot give out info. Would this help with me having to close the CC account?

[Gerri]

The privacy notice is different than the rate hike notice. You can opt out of information sharing without it affecting your account.

But your real dilemma is whether you want to opt out of the new rate and let them close the account so you can pay it off at the old rate, or keep it open and accept the new higher rate. Neither is a great option, but you may want to consider whether you can realistically afford to pay off your account at the higher rate. If not, you may be better off opting out and just trying to pay off at the lower rate. (As you point out this may affect your credit score.)

[Michelle]

Hi Gerri,

I, too, received one of these Chase Credit Card 'Change of Terms Notices'. (I don't have the Notice directly in front of me right now.)

First, the good news, the upcoming laws are slowly taking effect because this is the first time that I received such a Notice that was mailed separately and not buried with(in) a monthly cc statement.

The bad news, the fine print continues to state if a customer does opt-out of the new Terms, not only will Chase close the account but Chase, at any time or immediately, can require payment of the entire balance due. Customers who have high balances due to good or bad intentions (hospital bills or shopping too much) may not be able to afford to cough up $7,000 immediately!

The notice that I received last week stated that Chase will change my rate to 28% + the current Prime Rate! So, I am looking at a 31%-34% interest rate! The default rate will be 31% + the current Prime Rate with any affiliated Chase company including Wamy. The notice even says that it's because they can. So, regardless of my non-late payment history, they will raise my normal APR in August.

A friend of mine has always stellar credit score. Chase raised her APR from 3.99% Fixed to 9.99% Variable after Chase took over her WAMU CC.

I feel that Chase is fleecing all of their customers before the new regulation and laws come into play.

[Patrick]

I received a credit card statement with a change to 14.24%. I have a $10 balance, but I have a $34k credit line and occasionally use the card for large purchases. I have been lucky to pay off the balances within a couple of months after purchases. I know some people are not so lucky. My complaint is that apparently they sent an opt out letter which I didn't respond to, to either close my account or keep the account with the higher rate of 14.24%.

As far as I am concerned Chase management is bunch of idiots, Congress is a bunch of idiots, the Fed is a bunch of nitwits. They want us all to run out and shop, buy cars and use credit. Are these people insane? Up yours big bank executives, I guarantee you that I will YELL obscenities at any of your employees who try to call me with credit card offers. So take a hike you CLOWNS!

[lon neal]

chase is ripping everyone off,jumped my intrest rate to 32.99 percent,their a bunch of scammers.a $300.00 payment on an $8000.00 balance and i get $200+ in intrest every month,thats $2400.00 a year for them in intrest from me alone.if you have a chase card close it down before they screw you too.i will never do business with chase ever again in my life,not even at their local banks that pop up everywhere.screw chase don't give them your business.there needs to be a fedral cap on these charges.the new rules arn't worth a crap to us being screwed!!!!!!!!!!!!

[Gerri]

To everyone who has shared their stories to far, thank you. And I am truly sorry to hear you are getting backed into a corner with these changes. Fortunately with the first part of the Credit CARD Act in place you'll have some relief (see my posts the week of August 2009) but you'll want to make sure that you read the notices you get from your card issuers immediately and opt out if necessary.

I'd also encourage you to continue to complain to your elected officials in Congress. The economy is not going to improve if we have to fork over all our free cash to the card companies, leaving nothing to spend locally.

And keep letting us know what's going on. If you are willing to talk with a reporter, please let us know.

Gerri

[sam]

Do what you can do personally to show your dissatisfaction or ANGER by never doing business with Chase again. I also got screwed. sam

[Candy]

Does Chase practice universal default?
My account has been closed recently with a balance. I received a letter in the mail a few days later saying that they decided to close my acount due to:
History of unsatisfactory rated accounts
Rapid increase in revolving balances
Yes, I do have a defaulted account with another credit card company that I am currently working out with, but not with Chase. I have paid three times more than the minimum payment and never had a late payment with Chase.
If Chase doesn't practice universal default, how can they do this?

Also, this seems to have started when I wanted to know my current FICO score and did a 7 day free trial of freecreditreport.com. All seemed fine until I requested my credit report from Experian. Your thoughts?

[Gerri]

Candy - If I understand you correctly, they closed your account but they did not raise the interest rate? Is that correct? How recently did this occur?

(I doubt your request to FreeCreditReport.com had anything to do with it.)

Gerri