Latest credit crisis looks like a gouge to me
Alarm bells went off last month when the spending spree continued with a $50 billion deal for Merrill Lynch.
Someone's going to pay for that, I thought, and it's not going to be the shareholders. It's probably going to be for me.
I hate it when I'm right.
Last week, Bank of America notified me that my credit-card interest rate was increasing from 9 percent to 21 percent. I'm not blameless: I was hours late on a payment one month and a day late the next. Rules are rules, and BoA's rules -- which I had agreed to -- gave them the right to jack me up. Even though I've had the card for 10 years with nary a previous blip on my record.
It might not have mattered anyway. BofA, and other lenders are well, have made a practice in recent months of hiking rates for no other reason than "because we feel like it."
Which is why I chucked this morning when I saw a New York Times story declaring charge cards the next credit crisis.
Don't get me wrong: Overcoming addiction to easy credit is a good thing. I could have paid off my BofA card a few months ago, but because the payments were manageable, I opted to let it ride and keep the cash in reserve. I'm reversing that course now.
I'm lucky, though. I have the wherewithal to pay off. Many people don't, and if they're really unfortunate, they'll wind up with 21 percent credit-card interest at the same time they're in foreclosure.
It's a gouge, pure and simple. Banks would rather crack down on the little person than work it out. But, my, how their tune changes when they're going to Congress with their hats in hand.
Meanwhile, Rep. Henry Waxman wants Congress to look into whether the recent bailout is going to bigwig bonuses and there's increasing concern that the federal money -- that's our money, folks -- is being horded instead of going back into the economy.
Some banks already have declared their intention to sit on it. First Horizon, a Tennessee bank, got $866 million in government investment on Monday and said the money "adds to its already substantial cushion against the adverse effects of the weakening economy," the Washington Post reports.
I had a cushion. It's going to BofA.
Credit-card rates have been a gouge for years anyway, holding steady even as the Federal Reserve Board has whittled rates. I know BofA knows they've gone down, because interest rates keep falling on my CDs.
I'm glad to be rid of the debt, and I'll be better off in the long run. The same won't apply to families closer to the edge.
And banks will keep doing what they've been doing because they can. I'm eager to see what happens, though, after they've stuck so many pins in people that no one can pay and they're mad enough to march outside corporate headquarters. And angry enough to really hammer Congress the next time banks are begging for bucks to "help homeowners."
Copyright 2008 Debra Legg. All rights reserved.