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I got the same letter, Capital one is my first card. I had a late payment the same month I got the card 4 years ago and have had a perfect payment history since then so it sucks to see them raising my rate like this when I've been a good customer for years.
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I had that happen with a Visa I had. So I got myself an Amex clear card and I've been happy since!
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@egoods: Amex is supposedly getting jitters too and lowering credit limits. Which especially amps up business people who use it for various expenses...
>a company that more than doubles it's APR
>a customer that pays on time and doesn't abuse the card.
PROTIP: You're not a good customer.
I'm not sure, but I think they collect fees from the merchant for every transaction. Can someone tell me if they collect fees from the merchant for every transaction? If only someone would reply to concordia and mention how they collect fees from the merchant for every transaction.
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@cmdrsass: it's not counterintuitive at all. Credit card companies don't exist for altruistic purposes. They are in the business of making a profit, and their gonna get their profit one way or another. I prefer to pay cash for everything these days. Credit is overrated.
@cmdrsass: True they don't make any money off you from late fees and the like, they are still skimming thier fees from every purchase you use the card for at the store. It's not like they're not making any money by your using the card. That only happens when you don't use the card period.
@Kogenta: Yes, but the real money is in interest payments. merchant fees just keep the lights on at credit card hq.
@cmdrsass:
Actually, it depends. Credit card fees are often around 2%. It might seem wierd, but this is often cheaper than cash/check handling costs.
Consider a card with a $1000 average monthly balance at payoff. $20 of fees/month. There's 12 cycles per year, so $240 in fees a year. On ~$1000 of money.
That's 24% interest, of which the CC company doesn't have to worry about losing their $1k on. Even if the fee is only 1% after rebates or such, that's 12% safe interest, better than 21% where the person is 50% likely to never pay the balance off at all.
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Exactly. CC companies HATE people who don't carry a balance because they don't make one penny off of you.
@wgrune: credit cards still make money at the point of sale (i believe it may be 1% for MC/Visa and more for Amex) that they charge the vendor so they're making money
@craptastico: Don't forget that Capital One is not Visa. Capital One pays Visa for the rights to be a Visa card, and I believe it's Visa, not the banks, that collects the transaction fee. Them and the vendor that sells the Visa service which usually seems to be yet another separate party.
@wgrune:
Holy crap, I know that they make a fee from the mercant. I thought it went without saying so I left it out of my original post.
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@wgrune:
Credit card companies collect transaction and usage fees from vendors through their merchant agreements. Interest income helps, but most would prefer to skip the chargeoff risk on carried balances at this point unless you've got stellar credit.
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@wgrune: Actually they still make money on the transaction fees from the merchant. They would rather you use the card and pay it off every month than not use it at all.
@wgrune \"they don't make one penny off of you\":
Yes, they do. Because they're still earning fees from the merchants when you use that card.
I hope that the new administration revisits the idea that credit cards can charge these outrageous interest rates to their customers. It is usury.
I got the same notice in the mail a couple days ago and got really mad until I realized they were only changing the default rate. I clearly wasn't up on my credit card vocabulary, because when I called Capital One to complain, the guy had to explain to me in broken English that it only applies if I'm late on a payment, etc. Not saying Beverly doesn't know what she's talking about, but hopefully for her it's the same situation as mine.
@annab: \" the guy had to explain to me in broken English\"
How is that relevant to the rest of your comment?
@edwardso: ill have to agree with annab on this, i hate that when i call for information about my credit, its calling india, im all for outsourcing, but when it comes to my money, my credit, it annoys me, paypal does this as well.
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@annab: I was confused so I reached out to my credit card (I received the citibank one) and they explained that if I carry a balance, regardless of reason, that I will be charged what annab called 'the default rate'.
Annab, you were spun with terminology. You don't have a flat tire, you have an underperforming vulcanized atmosphere based shoe.
@annab: i got the same letter but it basically said call and dispute it (close card) or deal with it. my wife threw it out apparently (tried finding it last night)
I think they did this on purpose. Your purchases probably generate costs for them and the simple bottom line is that if they cannot charge you interest on your monthly balances they are not making money off of you. Its a completely one sided relationship. At this point for them to raise your interest rate is simply them saying hey, \"our relationship is totally one sided here\".
Even though i do feel credit card companies are evil, they're not in business to not make money.
Raising the interest rate on you like that is simply them saying hey look, we don't want your kind of business.
@Lcstyle: Your purchases probably generate costs for them and the simple bottom line is that if they cannot charge you interest on your monthly balances they are not making money off of you
This is a common fallacy among the public. The CC issuer makes lots of money off you. Every time you buy something with your card they get a percentage, generally between 2-5% depending on the vendor and the card.
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@Lcstyle: Regardless of how you pay the bill every month, CC companies make money off the merchant fees. So, as long as you are using the card, Kapital Eins is making money.
But you are right that Kapital Eins is probably not interested in Beverly's business, and is raising the rates hoping a certain percentage of customers that get this notice cancel the card. I think for the past year or so they've been trying to shed risk.
Capital One has never treated people who pay off their credit cards with much respect. I had a rewards card with them that had a $18 annual fee. They canceled the reward but kept the fee. When I tried to get the annual fee removed, I was told they had no other products for me (This was when their \"No Hassle\" card advertisements were in heavy rotation.) I am no longer a Capital One.
Its funny, just last night I was watching a Documentary on this very thing. I believe it was a PBS Frontline show on how CC Companies simply hate customers like the OP. They don't make money off of them and as sad as it is, it's a fact. As such, they'll bend and contort their own agreements to appease their bottom lines, dismissing the clients \"Best Intentions\". I'd call them up and complain, though keep in mind, they already dislike you, as such, they probably won't be jumping through hoops to keep you as a customer.
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My wife and I are the kind of customers the CC companies hate: we always pay our bill on time.
If this was me, I'd shop for a new card and never use this one again.
Chase increased my \"fixed\" APR from 11% to 18.9% when I had a balance on the card. I payed it off in full and threw the card in a drawer. About a year later I was shopping online and decided to use the card just so it stays active and the amount was around $20. When I got my statement I noticed that my APR had dropped down to 10.5%. I guess they missed me. :)
I used to work for the mighty Capone. If this was, as theorized, a misleading/confusing letter, we'd have been scrambling to put an up-front message on the phone systems to attempt to clarify the issue.
Of course, since they told me I couldn't work there anymore, I get to enjoy any bad publicity that they drum up by their own stupidity.
the usage of \"default\" rate also confused me with my Discover card - I called them to complain that they were going to raise me to 29.9 but I was informed that rate would only take effect if I was \"default\" on a payment (late).
This seems anti-consumer at first blush. And it is - existing balances are about to become more expensive. That means higher costs for borrowers, even high-quality ones.
But in terms of the broader economy, I encourage you think in terms of incentivization. Punitive interest rates encourage borrowers to liquefy their credit accounts due to the increased cost of money. Ultimately, the result of these behaviors will be a large-scale reduction in outstanding balances. That's an important de-risking step that our economy needs to take, however painful it will be in the short run.
@ADismalScience: It also encourages more defaults when people cannot pay up the card due to the higher rates.
I'd rather apply immediate stress to consumer debt and suffer in the short-run than create a long-term problem with stagnated consumption/output.
Another reason to not have a credit card. Cash is king or get a debit card
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@Flow Bucks: If you're a halfway responsible person, credit cards are much more beneficial. Building a good credit history, rewards, consumer protection, etc., etc.
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What's in your wallet? Bend over and we'll show you.
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I have three cards right now - the AT&T Universal Card, a Cap One Platinum, and a WaMu (soon to be Chase) Card. I've cleaned up my credit a fair amount in the past few years and managed to get my interest rates down on all of them. Until recently.
Citibank bumped up my rate with no provocation and changed the payment terms on my AT&T card. This week, I got the same letter with the same rate change as the tipster. No word from WaMu/Chase yet, but I'm waiting.
The thing is I can't do anything but take it. My credit is still only fair. Given the current economic picture I can't get new accounts to roll these into, and the companies don't have much incentive to lower my rates. The kicker on all of this is that I was working to pay these cards down and bring my debt-to-income ratio back into a reasonable balance - which is a fancy way of saying that I don't have any good way of opting out of the changes.
@paco: You can opt out and close the account. Your interest rate stays the same till paid off. And chase told me I could open the card back up at anytime (we'll see!) so that way, when you reopen the empty card, your credit score is better cause it is a long standing card. (assuming credit scores only look at the opening date:current date and not at each individual month.
I've got a big point to add: I got the same letter but I'm going from 6% to 16% on PURCHASES and my default rate is jumping to 25% I've never missed a payment - I've had the card for over 5 years. I called executive support and they basically told me to go pound sand - this is an across the board and there's nothing they will do about it.
I got this same notice yesterday, I called and they would not budge, so this card is going in the freezer. I wont cancel it and hurt my credit score, I will just stop using it in protest, even though I paid off the card each month. (I used it only for one recurring charge)
I will do the same to any other CC who ups my interest rate. If everyone did this, perhaps, just maybe, they would get the hint and stop gouging us.
I just got this notice yesterday. This sounds like it is universally across the board, because my situation is entirely different than the OP's.
I have only used my Crapital One card once in the past two years. I have long moved to greener pastures at Discover and now Chase. The funniest thing is my Cap One is my oldest card and is the only Platinum card I currently possess.
Oh well. I guess they need to pay those Vikings' lobster dinners somehow...
@BlackMage is doing the Time Warp agaaaaaaain!!!: Platinum is just the color of the card. These days, even those cards that have $500 credit limits and $458 of fees upon opening call themselves \"platinum cards.\" Actually, all the cards in my wallet are platinum... I don't know if any of the companies I go through even have non-platinum options... excluding amex and store cards.
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Perfect timing, Consumerist! I thought about emailing you the SAME EXACT story, as it has happened to me as well.
Same boat - pay on time, zero balance. When I got that mailing that they were raising the rate to %29.X, I flipped my gourd.
But the sad thing is - they wouldn't even consider lowering the rate when I called. Not one bit of leeway. All I got was a reminder of their many services they offer.
After doing some research, I determined that the American Express Clear card was better suited to me. I cancelled Capital One and switched to them.
What's in my wallet? Not Capital One!
I received a letter from Capital One yesterday informing me of a change in my interest rate. For several years now, I've had a card with a flat 4.9% interest rate, but apparently they decided I needed a variable 13.9% variable interest rate instead. Since I have excellent credit but rarely carry a balance(Usually only for big purchases like those mentioned above), my guess is they are trying to get rid of the less profitable customers, even though we are a stable source of income.
After reading the comments here, I checked closely, and it is indeed the actual APR that is changing. The Default rate was also raised to 29.9%. Needless to say, I'm in the market for a new card now.
Same here. Last week Capital One sent me a letter raising my 4.99% to 13.9% with a default of 29.9%. I've had this Platinum card for many years and recently paid off my balance.Of interest, after paying off the balance I received a statement with a new balance of $16.25. When I called to question this finance charge on a zero balance I was told it was for the balance I carried before paying off the card.
@FreemanB: I mentioned this in my comment, but check out the American Express Clear card. I'm not affiliated, just trying to spread the love...
Same letter...8.9% to 18.9%. This is NOT the default rate. That's even higher. Excellent credit. Pay off every month. While some readers think they're not making enough off me, don't forget they get a percentage from the merchant for every purchase! Greg
There seems to be confusion about the term \"default rate\" - it is not the rate you pay \"by default,\" it is the rate you will have to pay if you default on the terms of the agreement (late payment, overlimit, etc).
It would help if somebody could post the exact wording of the letter.
Don't close the card, just don't use it.
I don't have a Capital One card, but I do have a Citi card and got basically the same letter a couple weeks back. They raised my rate from 9.99% to 19.99% starting the first week of February. I got the notice a couple days before in January.
Never missed a payment, always pay more than the minimum and always pay early. Sadly, this is the only card I have with a balance and my goal was to have it paid off by the end of the year... now that they doubled my APR, I'm looking to move the balance to a different card.
I had the same notice a few days ago, since is does deal with the default rate, and the company has been pretty good to me in the past when it comes to fixing problems and mistakes on their part, I plan on sticking it out with them
I wouldn't close the card unless they charge you fees when you aren't using it. The hit to the credit score from less available credit and shortened average credit history kind of sucks.
Well, they did charge me fees. At the same time of the notice of increase in rate, I got a $69 \"annual fee\" slapped on the account.
Granted, when I canceled, they removed any fees applied in the prior 30 days as part of the cancellation. So that ended up being a non-issue.
Also - my credit score went up +18 points for closing the card.
Just because you pay off your balance, does NOT mean the card isn't making a profit! Every CC charges the retailers 2% - 8% on every transaction. (depending on the size of the acct) This is why many small businesses give a discount for cash. On average, Visa and M/C have lower rates, and AMEX charges the most. This is why some retailers accept only certain cards.
If you pay off every month, get some good cash back cards and laugh as the credit card companies pay YOU!
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I love Capital One. They are the only ones that don't charge a foreign transaction fees on top of everything else. I pay my bills off on time in full and their interest rates don't effect me. As far as I am concerned, they are providing a public service by encouraging people not to live off of credit. People and governments need to learn to live within their means.
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I wouldn't close a credit card solely out of spite. Capital One isn't going to care about losing one customer, and closing your only credit card will seriously ding your credit score. And if you're not carrying a balance, why worry what the interest rate is, anyway? Citibank jacked mine up, too, but I just laugh at their silliness every month when I pay my bill in full.
PS: Unfortunately, Concordia is right: Good credit card customers carry big balances and pay tons of interest. They also occasionally pay late and bounce a check so as to give the bank still more opportunities to levy those punitive fees they're so addicted to.
I wont cancel it and hurt my credit score, I will just stop using it in protest, even though I paid off the card each month.
Nothing personal, it's just business.
@Eoghann: From my experience, this will take at least a year for them to say adios. Generally, I use CC's that dont give me something in return about twice a year to prevent a cut-off, and keep my credit to debit ratio high. CapOne however has a horrible service dept so I wont feel slighted in the least if they dump me.
I just got a shiny new Amex card and I think we'll be making beautiful, well serviced, purchases together.
A CC issuer did this to me once. I called to complain, since my payments and general credit were perfect.
They were unwilling to change the APR back, and told me I had two options: Close the account, or accept the terms.
I told them I had another option and I would pick that. They asked me what that option was, and I told them they didn't need to know.
What's the third option? Transfer the balance elsewhere, keep the card, and charge $5-$10 every few months then pay it off. Technically, I accepted their terms, but I maintained control of the situation.
I wasn't about to let them adversely affect my credit score. Option 3 allowed me keep my total available credit and not pay a dime in interest to them.
...Oh yeah, and with Option 3, it costs them more to keep me as a customer than for me to use their card.
I was also socked to get this mailing over the weekend. I burns me to see them get money and folks get the interest rates increased. I recently paid my bill down to $5.91 remaining on the balance this month. Talk about a kick in the pants!
I wonder how much of this whole interest raising spree CC companies are on is because they want responsible people to cancel, how much is because profits are down, and how much is because of the new rules not yet in effect (particularly the one where they can't change interest rates on the existing balance). I imagine it's some combination of the 3, but which is the largest factor?
Where's Dave Ramsey when you need him?
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Yep, I too almost fell for the confusion of \"Default Rate\", and, I never carry credit card balances. I think they might have wanted to send an extra note with that info packet to explain it to humans...the legalease-only thing they sent caught my attention too (even though it really didn't need to).
Who cares what the rate and terms may be if you are a responsible customer?
Just to be clear, in my case and that of several others that have comment, the actual APR is changing, not just the \"Default Rate\". I can't say which was the case for the original complain in the article, but my notice had two different sections, one for the normal \"Purchase/Transfer\" APR and another for the \"Default\" rate. Both were being increased above what it states now.
I don't know if I will cancel the card or not, but the only reason I kept it over others before was because of the low interest rate. Now that it doesn't have that advantage, I'm going to shop around to see if another card can offer a better overall deal.
Credit card debt? Please, are you insane?
as a CapOne CSR, I'm taking these calls all day. It was an industry wide repricing, about 30 million letters were sent out. We agents have nothing to offer the callers who received these letters, except letting them know 'it's not them'. Other departments sometimes have the option to delay the APR change for a little while. Please remember if you don't like the new terms, OPT OUT, don't just close. If you close with a balance without opting out, you will have to pay the balance at the new rate!
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CapitalOne lined up my checking withdrawals, large first, so that they'd maximize overdrafts. So, even though I'd put $600 in cash in their ATM the day prior, four charges amounting to $90, resulted in $140 in overdraft fees.
I called and told them that the cash to cover it had been deposited, and they reversed all 4 fees.
I'm switching to a credit union sometime soon. Fuck CapitalOne.
Mine was raised to 22.9% effective April 17th. It says \"having considered these economic conditions, your account's current Purchase rate (which by the way is much lower than 22.9%), the length of time you've had this rate and account, we will be increasing your Purchase rate.\"
I've had this account since 2003 and it's always been current. My credit limit is now just $500.
Capital One blows.
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Capital One is The Devil.
I worked for them once. One Friday night I'd stayed late to solve a tricky problem so I wouldn't have to do it on Monday morning. I was on my way out at 5:45pm when I was stopped and told I had to stay late to work on a last minute project. There was no advance communication and I should have already been gone. I had an out of town guest and dinner reservations so I told them I couldn't. The way they responded was to fire me over the weekend, I found out when my key card didn't work on Monday.
Wasn't that nice of them?
I thought average daily balance meant that even if you pay off your card every month, you would pay interest. If I had $30 sit on my card for 3 days then paid it off, my adb is 3$ (assuming 30 day billing cycle). ADB = The account balance at the end of each day's business, added together, and divided by the number of days. What happens when it's a positive value? Do you earn interest for overpaying? If my CC interest rate is 29.5% I should not only pay it off, but overpay and earn that. It'd be much better than a savings account. There's change I could believe in.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-411202-100x100.png\")
If this is her only card, I *HIGHLY* recommend she keep it, even if she barely ever charges on it and always pays her balance of on full.
Why? Because her \"credit to debt\" ratio will look phenomenal! Simple. And if they're not charging her to have it open, then she loses *nothing*. Just keep the card open, charge a coffee to it every 3 months, and pay it off on or before you get the statement in the mail.
Also, get a new card if you want.
I just closed my account with them. I have been a loyal customer with them for years, spending around $1000 a month on the card. But I made sure to keep a balance on the card (around 750) and paid on time each and every month. And they still jacked up my rate, so I closed my account. Mainly out of principle.
Am I the only one who doesn't equate \"paying on time\" with being a responsible credit holder? Financial responsibility means only spending the money you have - which is synonymous with paying your card in full every month. I know this particular person has recently started doing that, but a longstanding habit of not paying off the card in full doesn't exactly make her responsible,
I received a letter from Capital One two weeks ago informing me of a change in my interest rate. This card is paid off so I chose to decline the change and called the 800 number provided on the notice (BIG MISTAKE). My card in now inactive and will be closed in April when my card expires. I received a bill last week for the annual fee. I called Capone to ask why I have to pay a $39 annual fee for an inactive card soon to be closed. I was told there is nothing they do about it that I still owe the fee. I insisted that they close the account immediately and was told since I called the 800 number on the notice they could not close the account. My advice to anyone who wants to decline the rate, call the normal 800 number on your bill and closed the account that way.
I have NEVER made a late payment on my Capital One card and now they are raising my rates. Way to go, the government gives the banks more money(which is on us, the taxpayers), then we get to pay more interest on our accounts too. Yes, it sure does pay to be responsible..
I happily closed my two zero balance Cap One cards today. Who cares what it does to my credit? FICO and the banking world are screwing us daily.
I did feel sorry for the woman who helped me close my accounts. She tried to convince me from her script that the cards were still worth it for other reasons. She sounded frazzled and sighed a lot during the call.
What a mess our financial world has become.
I also wonder if this rate increase is a last ditch effort to screw consumers before the new laws hit them.
I got the notice yesterday. My purchase/transfer rate is going from 7.90% to 17.90%! I've had the card for close to 15 years and have never missed a payment. Granted, I always pay off my balance in full at the end of each month, so the impact on me SHOULD be negligible, but as a policy, this stinks big time!
i got the same notice (rate has been between 4.9-7.9 ngotiated for many years). I recently paid down my account and received the 17.9 % notice. (Not default- for cash purchases and 24.9 for cash advances) I don't do the cash advance thing- When I called to complain and clarify that this would not go into effect until April 2010- (interesting -that is the same time the law to protect consumers kicks in)- questioned whether this was ALL Capital One customers- or only the ones with good FICO scores(790) and paid down balances- Could not answer. I encourage everyone to join a credit union (current 8.9% all the time credit card and current 4.9 no fee balance transfer for life of amount transferred. Not only that, credit unions are a coop and you are an owner. My credit union, faced with the same economic realities is not doing this to us, rather finding other ways to address the bottom line, keeping us informed all the way. In addition, they saved Capital One money when after the unfortunate experience of my being pick pocketed and had a Capital One card and my CU credit card stolen (without knowing it)- My credit union picked up the fraud and called me on a Sunday (24 hrs after 200.00 in unusual spending occurred.) I had to notify Capial One- despite the fact $2000.00 in totally bizarre spending had occurred in the same 24 hrs with no one to notice. Of course I didn't have to pay- but we are all paying now.My credit union is smart (we had to eat $200.00, not $2,000)- They are not. So I will keep my Cap One card and make small purchases and pay them off monthly. I will support my local credit union for anything else. I LOVE YOU PSECU!!!I know I shouldn't say that too loud because banks fear and despise credit unions and have only tried to drive them out of business.
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If she pays in full every month, then wtf is the problem ? The interest rate really does not matter if she does not pay interest!
@310Drew: I agree you with. The other day I got a letter for my gas card I use with the rates skyrocketing like this, and my wife said \"You need to close this right now\" - and my reply, \"Why - I pay off the balance every month - who cares what the rate is\".
Of course my wife is the one who said:
her: \"I need to get a new car\"
me: \"why\"
her: \"because I almost paid it off and it's almost out of warranty\"
I tried to explain to her that not making car payments is a good thing - the money saved can pay for most repairs. I think she agreed with me, but still don't think she understood... I think she thought she should always be making car payments or something.
@310Drew: Emergencies. I pretty much pay my card every month, but I always envision getting stranded at an airport and needing to rent a car or buy an expensive plane ticket or emergency medical bills.
@310Drew: The problem arises when she suddenly finds herself in an emergency situation where she isn't able to pay it off in the next billing cycle and has a 30% interest rate. It has the appearance that she's being punished for being responsible, and who would want to stay with a company that did that to you?
@310Drew: >If she pays in full every month, then wtf is the problem ?
Hi, I'm Capital One. For fun, let's conveniently 'forget' to send a bill this month. Let's also have frequent 'maintenance periods' for our website. Oh, what's that? You missed a payment? It's not our fault! That'll be $50 + accrued interest, please.
@310Drew: You're right, she should also be fine with a 200% APR. Why should she care, right?
@310Drew: By that logic, then she should also accept a $50 late fee, and a $50 over the limit fee. There is no upside to having insanely bad terms on a credit card, even if it is paid in full every month. One slip will whack you good.
@310Drew: I got the same letter last week. Capital one was my first card 4 years ago, I've had a perfect payment record and I couldnt believe they raised my rates :(