Now its official, having come out of the mouth of JP Morgan Chase CEO Jamie Dimon: Chase says that it is going to cut 15% of its cardholders off completely and close their accounts. Why? He claims that the new legislation makes those customers too risky because they can’t make adjustments over time as the customer’s risk profile changes.
I’ve read the new rules. There are still plenty of opportunities to jack up rates, so I’m not sure what he is talking about.
Quite a while back in one of my posts I questioned whether it was that certain customers that were inherently risky, or getting their rates jacked WAY up caused them to become more risky? If someone is current on their account but the bank determines they are too risky so they jack their rate from 13% to 29%, and the customer can no longer afford the minimum payment, who’s fault is that?
I read an article back in 2008 (I wish I could find it again) about a community bank in Florida that offered the same rate to prime borrowers with good credit and sub-prime borrowers with not-so-good credit. It was a reasonable and relatively low rate. As the rates for sub-prime borrowers nation-wide was heading through the roof at that time, this particular banks rates of default among both types of borrowers was the same.
The bottom line is that banks like Chase jack up card rates because they can and because they think they will make more money that way, and they have for years. That card issuers are losing money on their credit card portfolios now is in my opinion highly related to the fact that they jacked peoples rates so high they can’t afford them. Sure, offering way too much credit to some people that they shouldn’t have contributed as well, but I can’t help but wonder how many of the people in default on their credit cards wouldn’t be if they didn’t have the incredibly high interest rate and all the late and other fees.
(soapbox off)
In a letter sent to cardholders, Chase is urging customers to use credit (i.e. sign for the transaction) rather than debit (i.e. enter PIN numbers) claiming that credit transactions are more secure than debit ones because you don’t have to punch in your pin (which someone might see. But security experts seem to agree that debit transactions are much more secure than credit ones.
Chase’s motivation in this is no surprise. When you do a debit transaction they get maybe 5-10 cents from the merchant. When you do a credit transaction, the merchant pays 30 cents plus 2-3%, normal credit card rates.
Use debit rather than credit to make life easier for merchants.
The full story is here.
You’ve got to love this story, which add more fuel to the feeling most people have these days that banks are just looking to cheat customers with all the small print and unclear language.
Chase says this about using non-Chase ATMs: “$2 each for any non-Chase ATM withdrawal, balance inquiry or transfer. $3 per ATM withdrawal outside the U.S.” You might think that means it costs $2 in the U.S., and $3 outside. You’d be wrong.
Now, a reasonable business would strive to clearly communicate its policies, both to reduce the amount of customer service expense required to deal with customers calling up to ask what gives, and to create a positive rapport with their customers. That clearly isn’t what is going on here.
According to this story, Chase has officially decided to stop waiving any late fees as a courtesy to loyal and good customers.
When I had forgotten to make my payment this last month, I went online and made the payment and saw that there was a late fee of $39.00. I called Chase and spoke to a representative who refused to waive the late fee, stating that the company has decided not to waive late fees as a courtesy from now on. I asked for a supervisor and she told me she was an account manager and that no matter who I talked to, the fee would not be waived.
Asking to have a late fee waived is not an unreasonable request. Even the most organized of people will occasionally slip-up and when a bank can accommodate that, it’s called good customer service.
This fits in nicely with my theory on Chase not really wanting retail banking customers (just their money).
Take a look at the rates for Chase’s freedom card. Sure, you get 0% for a year, but after that, customers with perfect credit get a 13.24% rate, customers with good credit get a 17.24% rate, and customers with poor credit get a 22.24% rate.
Not sure what the status is today, but back in 2005, Chase got in hot water for apparently blatantly ignoring the laws that control lending to military personnel; in particular, they were accused of charging higher than allowed interest rates for people on active duty.
Now even Amazon.com is a place where people are saying bad things about Chase: Amazon.com customer discussions. The gist of the discussion is that people are not happy with the Amazon.com Chase credit card. Here is one comment from the discussion:
“I opened an Amazon Visa through Chase. It is a huge scam. I have had credit cards for 30 years, never once a late charge, anything. On this card, I had a less than $500 balance. I mailed the payment 9 days before due date. The due date happened to be Sunday. Chase posted my payment on Monday, but said it was late. Charged $49 late fee, and $8 interest fee for two months, even though I paid in full. There are much better credit card companies out there. BEWARE!”
Wouldn’t you know it, a major loophole in the new law. According to this article by Business Week, business credit cards are COMPLETELY exempt from the new rules.
Bad bad Chase, Fees & charges | admin April 24, 2010 | 
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