Leaving Credit Cards Behind
Since I normally pay off my balances in full each month, I haven't been paying much attention to the "credit crunch" that so many small business owners lament and cry about. Most of those business owners foolishly financed their businesses with high interest credit cards. That was, until last Friday, when a collections agent called me from Advanta called to remind me that I was past due "60 days," and if I didn't immediately pay over the phone, my personal credit "would be damaged because I guaranteed the business credit".
I sifted through my records and couldn't find a statement from last month, and couldn't I find a statement for the current month either. When I called the Advanta customer service and fought through the automated attendant, I was told that the agent couldn't send me a copy of my current statement because it was "in process--" because the billing period had just closed.
I was less than 30 days late and was turned over to collections. I lost several billable hours sifting through stacks of papers, searching for a statement I apparently didn't receive. I'm sorry, but that kind of frustration for a meager cash back rebate (which was wiped out by the late charge) is simply not worth it. I electronically submitted payment and canceled the account. I will be using my debit card from now on.
Less Credit for Only 37% A.P.R.
Well, it looks like I got off lucky. There are numerous reports of Advanta jacking up interest rates as high as, get this: 37% A.P.R. Advanta has been quietly resetting customer's interest rates from 1-3 points above prime to 15-20 points above without the business owner knowing it (unless they carefully check their statement). In some cases, business owners are seeing their interest rates skyrocket to 20 - 31% A.P.R. overnight without any notice.
Credit card companies are jacking up fees, slashing credit limits, and increasing interest rates due to "market conditions." Unfortunately, this new a trend is running throughout the credit industry -- an industry that is allowed to capriciously rewrite it's agreement with cardholders at will. And they are:
"[J.P. Morgan Chase & Co.'s Chase unit] will also start charging a new $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5% of their outstanding balance, from 2%. Citigroup Inc.'s Citibank unit and American Express Co. have been notifying groups of cardholders that they will be raising their regular interest rates by two to three percentage points. In addition, Amex is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fees to 2.7% from 2% on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards."
Nice. I think 2009 is going to bring more of the same: you are going to see more rewards/points devaluations, more fees, and more rate jacking as the credit card companies have to live with their bad financial decisions.
At this point, I have to agree with Dave Ramsey's philosophy: cut up the credit cards and live debt free.
References
- Credit-Card Users Face Higher Fees. Wall Street Journal.
- Credit card rates jumping. CNNMoney.
Labels: Business, Personal Finance
