INDIANAPOLIS (WISH) - Some credit card companies are sending notices to their
customers, telling them about dramatic increases in interest
24-Hour News 8 took one of the notices to Butler University
business professor William O'Donnell and asked him to explain -- in
laymen's terms -- what it says.
"The first thing that they're doing is they're adding a
significant increase in your rate -- the interest rate they're
going to charge," O'Donnell said, regarding the notice.
O'Donnell also said the credit card company is dramatically
raising the interest rate for a cash advance.
"If you use your card to get a cash advance -- use your card
like an ATM card -- they're really going to nail you. You're taking
your annual rate up to almost 25 percent. That's for every dollar
you take out in advance, they're gonna charge you a quarter. It's
amazing," said O'Donnell.
O'Donnell said the increase is a trend.
Analysts say credit card companies changing the rules now
because they don't want to see so many of their own products in
consumer's hands anymore.
O'Donnell said banks cannot afford to increase the amount of
debt they have out there with bad customers. The hope is that
reining in the bad debt -- and increasing interest rates -- will
help make up for the billions of dollars in bad debt banks wrote
off last year. The increases will also go towards the billions more
they're expected to write off this year.
Consumer Wally Cox is grateful he and his wife are able to pay
off their credit card balances every month.
"I think it's sad sometimes, the situation being the way it is,
that companies like this come out and suddenly adjust. And I'm not
talking about just little small adjustments," said Cox.
The bottom line is that if you receive one of the notices in the
mail -- don't throw it away. Read it and make every attempt to
understand it because it could cost you if you don't.