Consider this: you have a balance on your credit card and you've been diligent in paying the statements on time. Then BAM! Your credit card company double or even triple your interest rate for no apparent reason.
Welcome to the world of universal default:
When Ed Schwebel was whittling down his mound of credit card debt at an interest rate of 9.2 percent, the MBNA Corporation had a happy and profitable customer. But this summer, when MBNA suddenly doubled the rate on his account, Mr. Schwebel joined the growing ranks of irate cardholders stunned by lenders' harsh tactics. [...]
"I paid the bills the minute the envelope hit the desk," said Mr. Schwebel, who had accumulated $69,000 in debt over five years before the rate increase. "All of a sudden in July, they swapped it to 18 percent. No warning. No reason. It was like I was blindsided."
The practice, called universal default, started after a rash of bankruptcy filings in the mid-to-late 1990's and has increasingly become standard in the industry. While MBNA declined to comment on any specific customer's account, its general counsel, Louis J. Freeh, the former F.B.I. director, said in a statement that it was being prudent by raising rates when it had reason to think the risk of not being repaid had increased.
Lenders decided they needed to watch for signs of trouble elsewhere, like missed car payments, he said. In those cases, he added, there are only two logical responses: "We're not going to let you have this credit card loan anymore and we're going to say, 'Pay it off,' or we can say, 'You're now more risky; we're going to raise your rate.' "
If you think that the Fed lowering interest rates would bring down your credit card's interest, think again. Here's an interesting article by Patrick McGeehan about how regular people get squeezed by crazy high credit card rates: Link
See also Frontline's Secret History of the Credit Card - Thanks MoonCake!
And why are these credit card companies able to charge usury-level interest rates? Because they're incorporated in states that have repealed or don't have usury rates (From an old sister site of Neatorama)
Banks cover their butts to the max. When things go bad for them, due to bad investments elsewhere, they take it out on YOU, and blame YOU for the fact that their CEO might have to hesitate for a nanosecond before chosing the solid gold Rolls Royce, rather than the sterling silver one.
Do yourself a favor: pay off your credit cards. Why be a slave to the banks?
The Citibank people were nice. I said I could send $50 a month. They said, that's fine. Send what you can. I told the MBNA people I could send $50 a month. They said, that's fine, you owe $200 more than that. I begged to work out a payment plan. They would not accept anything less than my minimum due. I decided if they wouldn't accept less, what was the point of paying anything? And they kept calling to collect the balance, and I kept begging to send less, and they kept refusing to accept it. Eventually my account went into collection. Their collection agency called me at work. They said they would garnish my wages, they were sending attorneys to my office to serve me, they were calling my boss. All lies, and all, I learned later, illegal. I would sit in my office and cry when they called. What are you going to do, I would ask them, take away my $2800 used 8 year old Chevy Malibu and the $40 in my checking account? It was a horrible time in my life and was exponentially more horrible thanks to MBNA. They are pure evil. They are predators. Their management deserves to have horrible things happen to them. Never do business with them.
I've never had one and I don't expect to change.