January 15, 2009

Where's The Happy Medium?

The other day, I noticed that the finance charge on one of my credit cards had gotten a lot higher, despite the fact that the balance on the card had not. The bank shall remain nameless. (It rhymes with Swashington Smutual.) Upon further investigation a noticed that my interest rate on the card had just about doubled. Determined to get to the bottom of things I called dear 'ol SS Bank and asked them about it. All the representative could tell me on the phone was that it had gone up, and apparently I was sent a notice, which gave me the opportunity to avoid the increase, but only by closing the account. I never got the notice, as far as I know.

A short time later, I received a letter from SS which said, basically, "We appreciate your business, but you represent an 'increased risk.'" Now, as I told the representative on the phone, I've never paid the bill late, I've always paid more than the minimum due, twice in the past year, I've paid off the complete balance (which has never been more than $1,500), and in the last six months, my salary has increased about $10,000. My credit score hovers somewhere around 700, give or take. I have to wonder: Where's the 'increased risk'?

The banks are in the mess they're in because they decided it would be a good idea to loan money to...well...anyone and everyone, regardless of circumstances. Then the roof caved in, and they demanded money from the government, which they got. Now it seems like they've gone too far the other way: they've got their money and they're sitting on it. The only people who are going to be able to get credit are the people who won't need to ask, it seems. I know, I know...the evidence is anectdotal. But I've heard a number of stories like mine, of rates increased like a thief in the night for the thinnest of reasons. I've also heard stories of people who are denied credit, who probably shouldn't be.

Can't the banks find a happy medium? You don't have to give the money away like lollipops, but you don't have to pile it in your mattress and sleep on it, either. In fact, the latter option seems about as dangerous to the economy as the former, considering the situation we're in. No credit to buy cars, houses, televisions, etc. would--I think--contribute even more to a recession/depression. But I'm no economist, so who knows. I do have one last question, though...

If we're a nation built on credit, and most of us have credit bills, then what happens if we receive our "stimulus" payment promised by our soon-to-be-president, and most of us spend that money on those credit bills, only to find the banks still aren't giving credit, or have increased the rates on the credit we already have? Will that "stimulate" anything at all?

If you're wondering about my situation, here's what happened: I called them back to give them an opportunity to correct the problem, which they passed up. So, I made a balance transfer to a card from another bank (which had a MUCH lower rate), and sent a letter to SS bank, telling them that while I have appreciated doing business with them, doubling my interest rate without adequate notification represents too much of an increased risk for me to continue to do so.

I still smile when I think about it.

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