Money Tips: Concerns Regarding Credit Card Offer (cont’d.)

Posted On: March 26, 2006

Guest: Polonius
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Concerns Regarding Credit Card Offer
Posted: Sun Mar 26, 2006 11:04 am

Quote:
CC co’s are using segments of the universal default Fed laws to circumvent State usury limits

No. There are no “universal default Fed laws”! So there’s no need for any circumvention. There are no Federal usury laws any longer either. And although SOME states still have usury laws, the big banks relocate their credit card departments to states that don’t.

Quote:
If you’ve ever looked at the return address on your statement, you may notice your credit card issuer is located in a state such as South Dakota or Delaware. That’s because these are the states that have either weak or no “usury laws” meaning there is no cap on the interest rate that is charged. (View this map that shows the states where the top ten credit card issuers are located.) The federal government once had national usury laws that set a cap on the amount of interest that could be charged on a loan. But after the Great Depression, it repealed them and some states put no new usury laws in place. That’s why Citibank, the issuer of Mastercard, moved to South Dakota, which has no cap on interest rates.

http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/
_________________
Polonius
“Neither a borrower, nor a lender be; For loan oft loses both itself and friend”

Guest: awshucks
Posted: Sun Mar 26, 2006 12:52 pm

Ok Polonius, forgive my lack of knowledge. I assumed that ‘universal default’ was the result of the latest round of Federal law regarding bankruptcy. Is it solely the result of court precedent?

Furthermore, does the activity noted in the article seem predatory to you?

Guest: TomfromCT
Credit Expert (100+ Posts)
Posted: Sun Mar 26, 2006 2:58 pm

My understanding is some proir federal court cases ended federal usury laws and threw it back to the states.

Arkansas has a limit on interest rates. Finding a bank chartered there is hard because the banks prefer places like Delaware. I think Pulaski Bank is chartered in Arkansas.

And they are predatory to the max. The whole idea of universal default. Basically, if they smell blood in the water, they are free to take their own bit. And with the new BK laws - you cant swim away.

I wonder if suicide rates will increase in a fashion conistent with the new BK laws.
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Guest: Polonius
SENIOR MEMBER (Member for 2 yrs.+)
Posted: Sun Mar 26, 2006 3:18 pm

“universal default” is just a bank policy. Nothing to do with any federal or state law.
_________________
Polonius
“Neither a borrower, nor a lender be; For loan oft loses both itself and friend”

Guest: mouse
SENIOR MEMBER (Member for 2 yrs.+)
Posted: Sun Mar 26, 2006 3:22 pm

DON’T EVER GIVE THEM A CHANCE TO USE THE DEFAULT RATE

Guest: TomfromCT
Credit Expert (100+ Posts)
Posted: Sun Mar 26, 2006 4:04 pm

mouse wrote:
DON’T EVER GIVE THEM A CHANCE TO USE THE DEFAULT RATE

Good idea, but easier said than done.

Most people who hit BK do so becasue of a job or illness….
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Average credit score: 709 !!!!!!

WOOOHOOOOOO

Guest: bullet875
Posted: Sun Mar 26, 2006 7:40 pm

Whoa! Why does the term “loan shark” come to mind?

Money Tips: Concerns Regarding Credit Card Offer (cont’d.)

Posted On:

Guest: Polonius
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Concerns Regarding Credit Card Offer
Posted: Sun Mar 26, 2006 2:26 am

No, you don’t get charged on money you already paid. You only get charged on money you’ve borrowed and not yet paid back. Two cycle billing basically means you didn’t pay your balance in full by the payment due date, so you no longer have a grace period for subsequent purchases until all is once again paid in full.
_________________
Polonius
“Neither a borrower, nor a lender be; For loan oft loses both itself and friend”

Guest: awshucks
Posted: Sun Mar 26, 2006 6:30 am

Yeh, a disturbing trend seems to be developing, in which CC co’s are using segments of the universal default Fed laws to circumvent State usury limits. The big money isn’t in the mere doubling of payments, its in the ability to give you a ‘fixed’ card rate one minute and after you have a sizeable balance, use any pretext (isolated late pay, late mail, other) to review the account/fico and retroactively jack interest rates into the 30 percentiles. Now you know why they so meekly aquiesced to shorter ‘normal’ repayment schedules…the back end benefit in penalties and lax law regarding assignment of penalties is a potential windfall.

My two cents…

Tip 1: Don’t keep any balance on a card that you can’t afford to pay in full today. This activity or the mere threat of it threatens to crush the CC carry trade.

Tip 2: Refuse to do any business going forward with any CC co. that evidences these loan shark tendencies.

I’ll post the url for the story I refer to shortly.

Guest: awshucks
Posted: Sun Mar 26, 2006 6:33 am

Here’s the URL

theintelligencer.net/business/articles.asp?articleID=3732

Guest: TomfromCT
Credit Expert (100+ Posts)
Posted: Sun Mar 26, 2006 7:44 am

The scary part here is how they kept the jack in minimum payments mostly a secret until the BK laws changed.

The only exception is BOA. They took a big hit on their bottom line but their decision stands out as admirable in a business ***** bent on making indentured servants of us all.

And with the universal default thing now - just applying for a new loan can potentially mean a jacking of your rates.

I think the new situation is sooooo far over the top in favor of the cc’s that it won’t last. Or at least we will find out if gov’t for the people, by the people has in fact ended in the USA.
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Average credit score: 709 !!!!!!

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Guest: maddybeagle
Credit Expert (100+ Posts)
Posted: Sun Mar 26, 2006 9:16 am

Here is what discover card did with my 2-cycle.

More specifically, made a purchase of around 500 bucks on 12/21/05 which appeared on my 1/27/06 statement. Paid the min. payment but no finance charges. The next statement on 2/27/06 charges me interest for the CURRENT billing period and the PREVIOUS billing period. So yes, the retroactively erase the grace period all the way back to the purchase date.

Always pay in full