Credit card rate increases

[nokids]

Couple years ago I took advantage of a balance transfer promotion that offered a 3.99 rate for the life of the balance. As long as I didn't miss a payment the rate would be good. It was a one time deal and I could not make new purchases on this card, so I cut it up and have been making my payments on time.

Recently, this credit card company was bought by a bank and I've heard from my brother who works there now that the rates will go up even on 'Life of balance' promotions.

My question is, is this legal?

They will probably first send out a letter informing me that the rate will go up in a few months. At that point they'll give me the option to accept or not. If I don't accept I guess they expect me to pay it all off before the new rate kicks in.

I was an employee of this credit card company, so I know the rates can change on regular cards. The excuse we used to give customers was 'cost of borrowing' has increased, 'we're not the red cross', yada yada yada, but increasing the rate on a rate that says good for life is breaking a contract. I gotta think this would be an easy win in court for any clients who get their rates hiked on a balance for life deal.

I know that every credit card's terms and conditions has in tiny fine print a clause that says their terms and conditions can change at any time. But if they change the rate on a balance for life then they are talking out of both sides of their mouths and it's false advertising to say 'balance for life'.

Greedy ***s

[jeffc]

rule #1. Never carry a balance on your credit card. Problem solved.

[justsomeguy]

Couple years ago I took advantage of a balance transfer promotion that offered a 3.99 rate for the life of the balance. As long as I didn't miss a payment the rate would be good. It was a one time deal and I could not make new purchases on this card, so I cut it up and have been making my payments on time.

Recently, this credit card company was bought by a bank and I've heard from my brother who works there now that the rates will go up even on 'Life of balance' promotions.

My question is, is this legal?

You need to check the tiny fine print for the balance transfer promotion (hopefully you still have it). If the "terms can change" clause is there, then you're screwed.

If you get a notification letter for a rate increase, every bank has an "ombudsman" that you should approach first. You can also complain to the Financial Consumer Agency of Canada and ask them to investigate:

http://www.fcac-acfc.gc.ca/eng/index-eng.asp

If there is no "terms can change" clause in the balance transfer promotion, you could also go to small claims court and will probably win. I would think that would be a last resort though.

[brucestats]

rule #1. Never carry a balance on your credit card. Problem solved.

the golden rule!

[John]

I'm with Jeff, i know it's not a possibility for some but as a rule we never carry a CC balance.

[nokids]

I have another credit card with points that I pay off every month in full b/c the interest rate is 20%. In this case I transferred over a balance on this promotion thinking that I could take my time paying it off.But if they're going to jack it up from 3.99 to 19.99, it's going to really become a priority to pay it off.

Thanks Justsomeguy, I have looked on my monthly statements and it says that my balance is at a promotional rate that does not expire. Now I'm going to go through the other document (terms and conditions) to see if there's somehow they can change a rate that is for the life of the balance. I would definitely fight this if they touched my rate by 1%. It's the principle!

[Kilroy]

The principal is the ammount borrowed. That '1%' wold be interest. I thought you worked for the CRA?

[nokids]

I meant the princip...... ugh

[justsomeguy]

I'm with Jeff, i know it's not a possibility for some but as a rule we never carry a CC balance.

A 3.99% interest rate is damn cheap on a credit card balance. I realize that balance transfers are treated the same as cash advances and thus interest is compounded daily instead of monthly, but at that rate without an increase in the principal amount you're basically paying the same as a line of credit or personal loan.

Of course the ideal is to be debt-free, but its pretty tough to live in this world without taking on credit. The key is to make smart choices when you do. Nokids, if you have a mortgage AND credit card debt, then you probably have some options for consolidation that would work to your advantage - especially if your mortgage is up for renewal soon.

[jeffc]

As an aside, I recommend to everyone out there to read David Chilton's books, The Wealthy Barber and The Wealthy Barber Returns. Even if you're not financially smart, these are about as easy as a read as you can get with regards to financial knowledge for the average Canadian.

[Kiwi]

My wife recently went through a similar problem. She is not agressive at all but called the company on the change. They relented and kept the rate at the same reduced level. No court, no Ombudsman, just a call, that was it.
To quote a current commercial "if you don't want to pay high interest rates... Don't pay high interest rates."
I'm no financial whiz but seems to me Line of Credit is a lot cheaper than the CC rates.