August 12, 2009
-
The other side of the Credit Card Coin, Pt. 4
Where will it end?The newly-wed California woman found herself in utter shock and dismay when, alter becoming cash-dry from the wedding, she called Chase to change her last name on her only two former WaMu credit cards. She was informed that she wouldn't need to change the name because they were closing her two credit card accounts. As manager of an accounting form, she had always been meticulous about paying on time and never over-charging. She always kept both credit cards active and even ran balances each month so she was paying the bank their beloved finance charges. When she asked why, again she was directed to wait until her notice arrived in the mail. When it did, the reasons were so vague, she found nothing to go on as to why this happened. Again, the 30-day delayed notice was applied. All she can say is: "It's extremely frustrating, Chase chopped me off when I was already down."
Alas, there seems to be no relief in the wings. This activity was not addressed in Senator Dodd's congressional credit card bill which will go into effect in the coming weeks and months (it's being phased in). The bill still allows card issuers to cancel accounts without advance notice. Changes of terms require 45 days advance notice but not cancellations. Unused (inactive) credit cards can be cancelled at any time and with no notice at all. Most of the large card lenders are engaging in this activity. Inactive cards pose a greater problem for lenders because they require moneys to be set in reserve in case those cards are suddenly maxed out. Also, they bring in no revenue.
As far as closing active accounts, the credit card lenders are systematically performing extensive reassessments of their customers as "part of pro-active housekeeping" before new government regulations take effect. Add to this the continuing deplorable state of the job market, home mortgage defaults and, worst of all for these issuers is the devastating "write-off" (uncollectible debt) rate on credit cards which has jumped nearly 45% just since a year ago.