US Credit card companies are getting away with murder - When interest rates hit 32%, there ought to be a law
Wesley Wannemacher of Lima, Ohio, charged $3,200 on a new Chase credit card in 2001 to help pay for his wedding. That put him $200 over his credit limit - and into a riptide of penalty fees and interest rates. Wannemacher told a Senate panel Wednesday that he had paid Chase $6,300 over six years, nearly double his initial debt. Despite that, he still had a balance of $4,400.
For years, the Republican-controlled Congress ignored consumer outcries as the industry flooded Washington with campaign cash to protect its outrageous practices. Now, with the Democrats in control and probing those practices, the industry has made a few grudging changes. But some of the most egregious policies remain:
•Many card issuers hit consumers with penalty rates of up to 32.24% for a variety of infractions, most commonly late payments. Adding to the unfairness, the sky-high rates can apply to customers' entire balance, not just new charges.
•Some issuers impose these onerous rates on cardholders who pay them on time, but are late paying another creditor. That's akin to a mortgage holder raising your rate because you paid your phone bill late. Citi announced last week that it was dropping this much-criticized practice.
•Many banks impose fees of up to $39 - nearly three times what they were in 1995 - for paying even one minute late or going over a credit limit.
Unless Congress is planning to intervene individually in the case of every consumer caught in a web of credit card debt, it should set some markers to ensure that credit card issuers behave better than loan sharks.
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