Are Banks Helping Cardholders?
I watched NBC’s Nightly News tonight and wasn’t surprised to see the segment about the gentleman whose Bank of America credit card account’s interest rate was nearly doubled without cause. The man reportedly hasn’t made a late payment in more than a decade and wasn’t over his limit.
Bank of America and other banks have been reportedly increased credit card interest rates and tacked on or increased fees at will. This is to be expected of an industry that faces little regulation and is given permission by the State of Delaware to do as it wishes with interest rates.
On the other hand, reports indicate banks are trying to be helpful to credit card holders who are strapped for cash in this economic downturn.
In fact, a coalition of banks is running TV, web and print ads inviting credit-card holders who struggle with their payments to visit HelpWithMyCredit.org. There’s even an 800 number: call 1-866-941-1030. The coalition includes Bank of America, Citigroup, MasterCard, Visa, Capital One and Discover. (Chase and American Express are not participating because they wish to work directly with card holders.)
So which is true? Are banks being helpful or are they gouging account holders?
Both are partly true in a “partly cloudy” sort of way.
“Banks roll out efforts to aid strapped credit-card holders” MarketWatch’s take on the current consumer banking situation. The article states, “credit-aid effort (by the banks) doesn’t provide consumers the whole story.” It’s a must-read article if you’re in a credit card jam.
In fact, the helpful part appears to be self-serving. Banks know they’ll lose more money from bankruptcies than from offering ways for card holders to work out a payment plan.
It reminds me again of the famous, TANSTAAFL, from Economics 101: There ain’t no such thing as a free lunch!
If you want a great economic mind’s take on this banking initiative, check out Mike “Mish” Shedlock’s article, “Beware of ‘HelpWithMyCredit’”
What has stirred this sudden desire of banks to help card holders? I imagine it’s the current activity in both houses of Congress to increase regulation of a banking industry run amok with fees and outrageous interest rates.
