This month, Thomas Geoghegan has an article in Harpers about how debt changed working-class America. Barack Obama sat down with bailed-out banks to discuss their credit card practices. I paid a bunch of ridiculous fees, actually usury, because I accidentally used my credit card instead of my ATM card at a cash station. Citibank announced a new Facebook program; for every friend you convince to get deeper into debt, Citi will give $50 to charity. And, a friend showed me a letter he had received from his bank. It was an offer to refinance his house at 105% of value, with no credit check or income verification required. Credit crisis? What credit crisis?
In my case, I called Chase as soon as I received the bill and asked that the cash advance feature be removed from my account. The first person I talked to told me that he couldn’t change it until I paid off my $140 cash-advance balance and all associated interest and fees (there is no grace period on cash advances). The second person I talked to said that the cash advance feature could not be removed unless I closed the account. The third person told me that the cash advance feature could not be removed, but the ATM PIN could be disabled so that I would not make the same mistake again. Now, if no one at Chase understands the fine print on the account enough to give me a straight answer, how am I supposed to understand it?
Interest rates are supposed to reflect the costs of borrowing money: inflation rates, the opportunity cost, and the default risk. But anymore, they are simply what the bank can get away with. Chase holds the mortgage and home equity line on our house, which are significantly more than the $140 cash advance I took by mistake. For that matter, my credit card limit is $20,000. I could use the card to fly first class to Paris and go on a spree at Le Bon Marche yet pay no interest if I paid it off in full the first month it was due. But take $140 from an ATM and hold the balance for 20 days or so, and the total fees and interest work out to about $24, an annual interest rate of 208%. (more…)
