Capital One raises my interest rate seven percentage points

The party is over: The reprisals of credit card companies have begun, as if on cue the moment the Senate made increased regulation a reality. 

On Friday, the same day President Obama signed the Credit CARD Act into law, I received correspondence from Capital One notifying me that my interest rate will increase, effective for all billing periods after Jul. 2, 2009.  Simply put, the rate on my business platinum account will rise from a reasonable 15.9 percent to 22.9 percent—a 44 percent increase in the rate. I am afraid to ask what the penalty rate would be.  Thirty-five percent?

To give you an example of how extreme this is, I’ll break it down into numbers.  Assume I carry a balance of $10,000, which is a realistic amount considering it is a business account, and I pay a minimum balance of $250 a month.  With my 15.9 percent rate, it would take me 58 months (4 years and 10 months) to pay off the balance, and I would pay $4,340.26 in interest.  On the other hand, with a 22.9 percent rate, it would take me 77 months (6 years and 5 months) to pay off the balance, and I would pay $9,059.07 in interest, more than double the previous amount. 

What is the reason for the increase you may ask? Well, if you follow my blog, you know that I am a responsible guy.  In fact, my account with Capital One is stellar: I pay off the balance in full every month and have a pristine payment history.  The reason given in the letter and by the customer service representative—located in India, by the way—was the “challenging economic environment”.  The customer service representative added, “Because you pay off your balance every month, it won’t affect you anyway, sir.” 

As I mentioned in an entry a few days ago, you can stop jumping for joy and declaring victory, especially if you are a business owner.  Intuition and experience tell me that several companies were waiting to hit the “red button” last week as soon as the Senate approved the Credit CARD Act.  In the coming months before the new rules kick in, rates will continue to go up, and several other adverse changes will befall consumers and business owners. 

In short, the cynical pundits may be right: Obama’s push for credit card reform was a fraud, and what we really need are interest rate caps for both arbitrary rate increases and penalty rate increases. 

Comments

[Me too!]

Capital One from 7.98% to 17.9%. I missed the opportunity to "opt out" in February 2009. I never thought they would go up this much. I anticipated a 1-2% increase not 10%!!! HAS ANYONE HAD SUCCESS GETTING THEM TO LOWER THE RATE BACK DOWN??? Otherwise, I may never get them paid off again.

[robin]

After years with citi, and others...they are raising our rates too. Citi, so far has the award for best rip off artist, scam artist, loan shark, extortionist, by raising our rate to 49.95 percent, over night. Along with that, it will be a 200 late fee ever month if minimum of 190 is not paid in full on time. If we wish to close account, they wont accept less that 500 a month...what a shame.

They will burn in hell, perhaps even if they say they are Christians...If they don't believe, but believe in something else, then they wont get to be re-incarnated either, and or the memories of those who work there will be dust in the wind, blown over a pile of crap,..cause that is what they are. If they were real humans, they would quit, because it was so shameful to work there, or for any credit card company.

We pity those people who have so little regards for their fellow human, and so much regard for their own well being...you can't take it with you when you die...so sad...

I can see the flames of perdition coming up around citibank and the other card companies come judgment day. Let's pray for them now, before they meet their maker.

The government has always protected big business. All the reform acts of the 70's and 80's, then with Clinton's administration, gave financial companies, free reign...Now obama's credit card reform plan is going to backfire, as it already has begun..

[M Regan]

I couldn't believe when I notived my rate increase. I too have been a customer of Capital One for about 13 years now. A good customer. I don't recall getting the notic ein the mail but regardless, when I called to complain (nicely) they would not reduce my rate to something lower. I went from 9 point something to over 18 point something! I know Suze Orman says to not close it but at this point I don't have much credit at all, and I am sure my FICO isn't great either because I have either not much credit or very old past bad credit. Whats the loss really?
Plus I am a renter and probably always will be a renter so I think the best thing for me to do is pay it all off then close it and I will be cutting it up and sending it to their CEO. Capital One is a HORRIBLE company that they would rather LOSE customers than keep them. My Dad always said "A half a loaf of bread is better then no loaf" so Capital One should be glad to have ANY money come their way!
I am telling you all get rid of your Capital One card and go with another company or just deal with life without a credit card! My parents did for decades and they were always debt free!

[Mark]

I would like to add my own frustrations with Capital One. I have been a good customer with them for 11 years and for the first time in my life due to salary and hours being cut, I am having financial difficulties. I was up front with them and said that I wanted to make sure they got paid and could they combine their credit card with the unsecured loan of theirs (I have paid off two other loans early in the last 11 years) and take the term to the max which would lower my payments and help me out of a jam. Even with a credit score of 775 and a perfect history with them they said there is nothing they can do it is two seperate divisions. They would rather not get paid then work with me. What a horrible company. I am going to be all over the internet encouraging people to cut up their Capital One card and mail it to Leslie Spencer c/o Capital One Bank PO Box 85619 Richmond, VA 23285-5619. Make sure Capital One is NOT in your wallet. Thanks for letting me vent.

[Claire]

Hi everyone, I have a chase card which was formerly
Washington Mutual. I have a big beef, since Chase took over my
Washington Mutual account, my interest rate has increased
1 point each month. I have a pristine payment history and much to my surprise, Chase has not lowered my line of credit. I have tried several times to call in to get my interest rate lowered, but
to no avail. I can't wait to get them paid off and get rid of this company. They really stink!!!!!

[Lucy]

Having being a cc customer of CapitalOne for several years, never late, never over-credit limit, never complained about anything, suddently, on the same day President Obama signed the new credit card bill, I received a letter from CapitalOne, informing me that as of March 1, 2010, my interest will increase from the present 9% to 17%, - ouch! But the annual dues will be still be the same: $19. Wowa! My choices are simple: I can cancel the credit card before March 1, 2010, and things will remain the same as now - or don't do anything! I have a small balance which I will pay before the end of the year - and I will not use the card again - as Suze Orman suggests = don't cancel credit cards as that action will hurt FICO scores. I suppose the annual dues will be charged again regardless.

[Virginia]

Wow...the same thing happened to me as well. I hate Capital One with a passion I think they dont know how to keep the people who actually use their credit cards wisely. After 4 years with them...my interest rate was 4.79% and raised to 18.99%!!!! I have always paid on time and paid off my balance but just like you all were told I got the "economic downturn" argument or should I say bit. So I closed the account and have advised everyone I know not to get a card with them or close their accounts and Look elsewhere.

[Shelley]

I too am completely in shock by the lack of disregard and disrespect I was given by Capital One after they increased my rate from 4.8% to 15.9%. I am a perfect customer of about 3 years who uses my card on a daily basis and has never been late on a payment. I typically would pay off my (usually very high) balance each month. Note that banks (credit card issuers) make lots of money off of us credit card users by charging their merchants a percentage of our usage. So, them saying they make no money off of us "convenience" card users is an outright lie. I feel bad now for the small business owners who had to pay fees to Capital One for my usage.

When I called general customer service they explained that due to the economy they had to make a business decision that will impact millions of customers and that there was absolutely nothing he or anyone could do and since it was after 11PM CST I would have to call back tomorrow. The people who have the authority to reduce the rate are no longer available for the day was his next response. I called back the next day and talked to one of those so called Senior Supervisors at a different number that I was given by customer service the night before and I once again described my dissatisfaction in a calm voice. After being talked down to and him saying if I paid my balance each month I wouldn't have to worry about the rate anyway and that I should take my $10,000 balance and transfer it to another card that offers a great balance transfer rate. I asked what my incentive would be to stay as a Capital One customer and he had nothing.

My Discover Card issues cash back (I have $150 so far). My Chase card offers flight miles (I have around 30,000) and I get points for gifts with American Express (over 30,000) and Citibank (about 10,000). I said my incentive to use Capital One was for the lower interest rate (I had 4.8% or lower the entire time I was a customer) and with that now up to 15.9% I have no reason to stay. So, with nothing to offer me and him telling me he was "the top of the food chain in the Call Center" and that there was nothing he could do and nothing anyone would EVER be able to do, HE decided my time was up on the call. He then told me that there were other calls in the queue and that he had to go and hung up on ME. I am amazed that this company would let go such a great customer with an even greater future potential by an uncaring, disrespectful jerk like that. I had to actually call back to close my account and that is exactly what I did. I transferred my $10,000 balance to Bank of America at 0% for 6 months with no transaction fee.

I understand the banks are suffering too in this tough economy, but so dearly are the consumers. So, instead of sending a passionate personalized letter explaining the need to raise interest rates, they send an impersonal and almost threatening in language change of account notification brochure. Did Capital One ever hear about targeted and segmented communications? Do they even know how to communicate properly to their customers when making such impactful changes to their customers accounts, especially their best customers? although I agree that no customer, no matter how delinquent they are, deserve this type of treatment, the "good and best" customers deserve more. The power of personalization goes a long way and if they would have planned their communication strategy about this with a legal sized letter with a thoughtful explanation and understanding of the hard impact this will have on many, the severity of these changes wouldn't seem as bad and we wouldn't have been so offended. They treat their consumers who are also struggling in these hard times by rewarding them with disrespect and a rate increase of 3X higher. Unbelievable!

This was a show stopper for me and my husband. I have the power of word of mouth and so do you, so don't ever bank with Capital One ever in this lifetime and make sure you let everyone and anyone know and they will follow suit. Capital One's logo is "What's In Your Wallet? Well, Capital One, it's not your card!

[RGiskard]

Got the notice today via Mint.com.

We will be canceling if they don't reduce the rate. In fact, we'll be demanding a lower rate than we had just to make a point.

We use 1 cc for purchasing each month for points, and pay off every month...so we're good customers for them. My FICO is routinely 800+.

[Carole May]

You are not alone. My best friend has a Capitol One credit card (personal, not business) and she also got a letter last Friday raising her interest rate from 14.99 to 17.99%. And, of course, she either has to accept it or close the account. Since it's the only card she has, she's stuck.

[Steve]

The credit card bill is a step in the right direction.
What is happening is that since the banks are flush with cash, they don't need their credit card business anymore. Why bother with the risk when they don't need to. What they are forgetting, is that the consumer remembers who treats him the way they do.
Banks are flush with cash now, but make no mistake, the same CEO's that blew billions will do it again, and there will be no bailout. Then they will turn to the consumer...and the ones that treated their consumers fairly will be the ones getting the business. This is no different than the car business...it always catches up to the greedy dealer.
Its just a cycle...

[Commie Stooge]

With the credit card now serving as a replacement for the standard revolving line of credit that a small business used to have; the banks have abrogated their (former) responsibility to small business.

Banks really don't want to loan to small businesses; in term of their costs it probably costs them as much to service a small business as a big one.

Remember when Citibank wanted to charge extra for using a human teller? This was a way to force people to use ATMs.

And the day will come when you'll pay extra to write paper checks (each paper check costs banks $1.50 to process).

[Kevin D. Johnson]

I think what the author meant in his article, which calls the president's efforts a fraud, is that the Credit CARD Act will not solve the main problem: credit card companies being able to raise rates at any given time and for any amount. While some good will come from the bill, it does nothing to cap interest rate hikes. In other words, consumers can and likely will experience interest rate hikes that are far more lethal than a late fee or other nominal fee. My most recent experience with Capital One--even as a good customer-- is a testament to that.

I hope that helps.

[Sharon Barlow]

It bothers me a lot to read "Obama's" push for credit card reform was a fraud..." Does this mean he personally is commplicit in the policies of the CC companies? I think at worst, he and the congress just don't "get it" when it comes to the situations many, if not most, of us face. Would you clarify what you meant by the statement?