My son had a problem recently with a classmate who was acting very aggressively when they played tag.
“Why doesn’t he play fair, Dad?” my son, 8, kept asking. “Son,” my husband said firmly. “Some people won’t play nice, and when they don’t, you just shouldn’t play with them.”
If only adults could follow that advice.
Credit-card companies frequently don’t play fair even when we do everything according to their terms. “Universal default” is an industry practice in which the credit-card issuer reserves the right to hike your interest rate if you are late or overextended on another credit account.
Then there’s two-cycle billing. The interest is calculated on the balance you carry over the previous two months. Let’s say you start the first billing cycle with a zero balance and then charge $1,000. You make a payment of $900, leaving a balance of $100. You pay interest not only on the $100 balance but also on the $900 from the first month.
Recently, the Senate’s Permanent Subcommittee on Investigations took a look at certain credit-card-industry practices. Executives from several credit-card companies were summoned to Congress in January and again for the subcommittee hearing this month to defend outrageous fees and interest rates.
The subcommittee brought in one consumer, Wesley Wannemacher of Lima, Ohio, who testified that he got a Chase credit card in 2001 to help pay wedding expenses. His limit on the card was $3,000. He charged $3,200.
Eventually, Chase charged Wannemacher $4,900 in interest, $1,100 in late fees and $1,500 in over-limit fees. He was hit 47 times with over-limit fees, although he went over his limit only three times.
After making $6,300 in payments since 2001, he still owed $4,400.
Just before the hearing, Chase decided to forgive his remaining $4,400 in debt.
Will Chase – and other issuers – also wipe out the excessive fees imposed on other customers?
Some credit issuers say they are ready to change some of the practices that have been criticized.
Part of the problem is that far too many consumers won’t be able to play the credit game wisely because the rules are convoluted. In a report released last year, the Government Accountability Office found that while millions of consumers use credit cards, many are confused by their own credit-card agreements.
“I don’t believe that the average consumer understands it, believes it, thinks it’s fair, and I don’t either,” said Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations.
Contact Michelle Singletary at singletarym@washpost.com or c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071.
