Chase Minimum Payment Increase from 2% to 5% - Cracking The Numbers
Just as Chase seeks to up its minimum payments now on a reported 800,000 credit card holders, new data suggests that credit card defaults are exploding. What Chase thinks is a solution to the problem, is only making things worse. The credit card default rate soared passed 2008’s high to 4.75% of all accounts.
The Chase credit card debacle goes much further than higher minimum payments. Many cardholders actually borrowed large amounts of cash to deposit in money market accounts and certificates of deposits – making an income on the difference and infusing probably near billions into banks and other secured borrowers.
How it works
Savvy credit card users are known for making full use out of low interest rates. There’s even whole communities online centered around borrowing at X% and loaning at Y%, all with credit given as a result of high credit scores and longstanding relationships with creditors.
The scheme is simple, borrow cheaply, for either the long term or short term, and lend expensively. Many people took out huge, ten thousand dollar loans at 1.99% and loaned to banks such as GMAC for as much as 4-5% during the CD heyday. The result was a few percentage points in interest, on borrowed money, in your pocket. On $10,000 that’s $200 a year, on $100,000 its $2000. And some people were floating just about that much in credit…
No real risk to credit card hedging
The risks of hedging:
You miss a payment
Missing a payment is the biggest risk. Often, late payment of the card incurs at $35 fee as well as a rate hike as much as 1000% on the least expensive balance transfers. After a payment is missed, promotional rates soar to new highs under the terms of service, sometimes reverting to the default rate of 36%. Very few CDs ever pay 36%, unless in war-torn, inflation rampant countries.
Borrowing Bank goes under
This is a minute, although considerable, risk. If you deposit money in a CD in a bank that fails, you’ll have to wait for the FDIC to cut you a check. While this process is executed as quickly as possible, you run the risk of bleeding funds until your initial investment is covered. Good news though, FDIC covers up to $250,000 of assets, so most people are fine in this regard.
FICO Pain
Borrowing huge amounts of money, often up to your credit limit, is a FICO disaster. The only people who should attempt leveraging credit cards are those that will not need access to a loan in the foreseeable future.
Minimum Payment Hikes
This shouldn’t be on the list, but it’s relevant with recent changes at many top credit card issuers. With minimum payments on the rise (in the case of Chase, from 2% to 5%) investors should be sure they can access money whenever needed. When you’re locked into a CD for one year, this can be difficult, as you will now be required to pay off as much as 60% of the debt per year. Previously, the rate was only 24%. CD investors are the most affected, second to money market investors which should only have to wait a period of days to withdraw funds.
I used a credit card offer by Chase with a low APR for life. I paid all fees and always paid more than the minimum amount and paid long before the payment was due. Because of the low rate (Was this predatory - looking at how they are dealing with this?), I consolidated many things. Now Chase is increasing my minimum payment. We, as taxpayers, bailed them out and I thought at issue was the “economy.” With Chase making this “business decision,” (damaging to the economy), shouldn’t they be penalized or made to reverse this decision. This raise in minimum payments puts more money in the pockets of the bank; and does nothing to stimulate the economy. I would like someone to explain what my government is doing to fix this situation. I’m concerned that no one is looking out for the American people, it can’t all be about the banks.
This isnt the whole story chase is also coming with 1% plus fees option
I agree the economy has collapsed, you have to invest in better resources. Great Video to watch
Watch Here!
This comment from CHASE was posted at banktime.com and sent me into a tizzy!!!!
I let’em have it!!!
“The cardholders affected by the new minimums will be those considered “high risk,” who have been less than diligent about paying their account scrupulously in the past…”
My comment at banktime.com is STILL awaiting moderation, after 3 days!!!
Here is my response…
That is what CHASE would like you to think! These cardholders have FIXED APR rate’s between 1.99 and 5.99….CHASE does not want to honor those rates anymore and the only card in they’re hand is to up the minimum payment in hopes that they will default into a high APR….They also offer to return your 2% minimum payment if you accept a much higher APR right now. It is EXTORTION and bait and switch, plain and simple….Also these cardholders have NEVER missed a payment or they would already be at a default rate….CHASE if you are going to make statements, WHY NOT STATE THE TRUTH!!! I for one am very tired of reading articles about how these are subprime cardholders…..They are in fact the best cardholders out there along with high credit scores!! THAT IS NOT WHAT CHASE WANTS…….THEY ARE NOT PROFITABLE!!!!
Here is a quote from another site after they made a DEAL with Chase’s Proactive Solutions dept….
“as soon as my next payment processed I will get a confirmation in writing. She also stated that it may take 2-3 payment periods for the actual amount and payment plan to kick in and my monthly statements may be higher, but so as long as I paid the amount agreed to in our discussion today, I would be OK. This makes me nervous, but she said that the letter that processes as soon as I make my next payment will state this.”
I WOULD BE NERVOUS TOOOOO!!!!!
For what it’s worth to anyone, I just had great success simply calling Chase’s special customer support lines. I gave them quick info about income/expenses, and they said they would see what they could do. They came back and said they could lower the payment, by switching it to a 5 year repayment plan. They lowered my interest rate from 3.99% to 2% and also reduced the minimum payment back down to essentially 2%. The said I did have to close the account, which is of little hassle, considering I was simply using it to pay down the balance anyway. I’m very satisfied with how Chase handled my matter and will continue doing business with them. The number which helped me was 877-890-2941.
Call chase on 877-890-2941, Portray your financial situation as currently making ends meet (monthly mortgage, rent, car payment, other credit cards against take home pay) before they raised your minimum payment increase to 5%. Request a fixed monthly payment for 5 years while agreeing to close the account (this will only slightly reduce your credit score as it closes one of your lines of open credit, but will be listed as “customer closed account” on your credit report.) I read this on another site and did today. Took me 5 minutes. This basically took my monthly payment back down to where it was, while reducing my interest rate by 1%. THIS ROCKS.
Chase is going to do what ever it can get away with. There are at least 750,000 comments on what Chase is doing. We are all pretty much in the same boat with the same feelings about what is going on. We are all consumers and the only way to effectively change the way Chase is doing business is to refuse to buy anything from businesses that continue to support Chase. It may be difficult but if researched it will work.
I have Fixed Rate at 3.99%. The credit card company increase from 2% to 5% the capital. I called them and gave me the following options: First, pay the increased amount of payment (my case from $210 to $498)……… or change my fixed rate to 7.99% to lower to 2% the capital. IS IT RIGHT?……….
I called Chase and they didn’t give me any option. In fact, their customer service rep blamed the Bush Administration for this! She said they made it law that they had to increase the minimum payments on everyone. What a lie! I am an excellent cardholder - always paid more than my monthly minimum payment. I also took advantage of their 3.99% promotions, and used that money instead of a second mortgage. My payment went from $600/mo to $1417!!! They want me to default so my interest rate hikes up. I would be afraid to work a “deal” with Chase. I can’t see them giving me a better interest rate and paying over 5 years if I just close my account. They will get you one way or another!
I will pay off my chase card, and any others as soon as possible. I will starve before I will do business with chase again. I will return all card offers, about 10 per week, empty, and help the post office.
I’m going to call the Chase “hardship” line (877-890-2941) tomorrow, hoping to get the 2%, 5 yr loan. I’ve seen comments that when asked for debt and income not to state too much or too little - can anyone give me a guideline of what they are looking for? 50% dti ratio, 60% dti…less…more. Thanks so much - any feed back is much appreciated.
There are several options for the almost 1 million customers that Chase has screwed. First, contact Chase just so you can hear the “thats too bad” speech. Then file a complaint here
http://www.helpwithmybank.gov/complaints/index.html
It will get Chase attention! Also file a complaint with your states Attorney General and Federal Attorney General. Chase can put some on hardship payments by closing your CC account and putting you on a type of loan that is low interest and low payment for 5 yrs. Not all will qualify.
There are class action lawsuits in the works that have been consolidated so those that can hang on for a few months…..
This is what you get with a government controlled by corporate money. Like FDR said, a government by organized money is just as dangerous as a government by organized mob.