Credit Card Fine Print


To credit-card companies, it's not sufficient that customers pay their bills on time every month; they must also avoid a daunting array of borrowing habits that lenders deem risky. Like borrowing. Katie Groves, 42, learned this firsthand when the annual interest rate on her Chase Visa bill jumped to 29.99%-from the previous 12%. Although she had never missed a payment and owed only $500, she was told that her rate had increased because Chase had checked her credit report. Most consumers are unaware that the banks constantly monitor all their borrowing behavior. Even if you just get too close to your borrowing limit (a figure you probably don't know) on your cards and mortgages, as Groves did, you can trigger what the industry calls universal default.

But ending universal default is only the start of sweeping changes to the lightly regulated, $160 billion credit-card industry that are being demanded by consumers and lawmakers alike. Both Hillary Clinton and Barack Obama are campaigning for credit-card reform. On Feb. 7, Representatives Carolyn Maloney and Barney Frank introduced a credit-card bill of rights that would make it harder for issuers to add fees and hike rates. Senator Carl Levin is also sponsoring a bill that would cap rate increases, rein in fees and require clearer disclosures of all costs.

The industry has reacted. Chase will join Citibank, which has ceased raising rates for customers on the basis of negative information in their credit reports. "There has never been such a spotlight on the industry," says Curtis Arnold, founder of, which offers card tips. "It's historic."

The added interest and late fees that typically pile up when more consumers are late to pay or exceed their credit limit-thus triggering a higher rate-are feeding a consumer backlash that is gaining strength. In 2007, 11,427 people filed complaints with the Office of the Comptroller of the Currency, which oversees bank-issued cards-a 13% increase over 2006.

And last summer, when the Federal Reserve opened its website for public comments on its proposal that lenders give 45-day notice before jacking up rates, more than 2,500 consumers wrote in, including Lee Davis, who emailed, "It's a little late … credit card shenanigans have already cost me my future."

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