5 ms·

What other product can you purchase, and have the price change after you purchase the product? What other form of loans/credit can you purchase and then have t

What other product can you purchase, and have the price change after you purchase the product? What other form of loans/credit can you purchase and then have the interest rate changed without your knowledge and without informing you because of a missed or late payment on a different loan? What other form of loan can increase your interest rate (cost) based on an increase in the balances on accounts with completely different companies? I've meet well educated Md's and people with Master's degrees who've gotten screwed by credit card companies. It's not a matter of education, IMHO. It's a matter of deceptive business practices that people don't really get wise to until they've gotten burned badly. Have you ever tried to read through a credit card agreement? I'm a well educated man, and I can't make heads or tails of those agreements. I'm sorry, but even an industry needed regulation, its the credit card industry.

ars 18y ago
The price is not changing after the fact - you agreed to all the rates and changes before you start. If they want to change those in any other way then they have to contact you and you have the option to stop using the card and pay off the balance at the old rate. The agreements are not that complicated - people simply don't read. I see it happen all the time with website UI's - the instructions are right there and people never read them. You don't need to read the full agreement - everything you need to know about the rates is on the back of the application - in a format set by congress. How much more regulation do you need? Edit: apparently there is more regulation coming: http://www.ft.com/cms/s/0/d70973f2-ca0f-11dd-93e5-000077b07658.html?nclick_check=1 http://www.ft.com/cms/s/0/d70973f2-ca0f-11dd-93e5-000077b076...
- sethg 18y ago
  I can't find the page where I saw the numbers, but a staggering proportion of American adults don't know basic math well enough to figure out which grocery store has the lowest prices. I assume an even more staggering proportion doesn't really understand how compound interest works.
  - eru 18y ago
    What do I care about dumb people?
sokoloff 18y ago
Student loans, personal loans other than credit cards, business loans, preferred stock, corporate, municipal and government bonds (from the issuer's perspective) all change price/rate in response to missed or late payments on other obligations. (In the latter case, often dramatically so.) Why shouldn't a lender be a able to offer a contract that allows them to increase their fees when the borrower shows themselves to be a less than ideal credit risk at some point in the future? The borrower signed the terms; if they didn't like them, they could have not signed them, or they can pay off and close the account now. Those are the two (non-bankruptcy) avenues for them to get out of the contract that they now don't like having signed.
- Retric 18y ago
  Bond's don't change rate when the company get's into trouble the cost of new bonds goes up. Student loans are normally fixed interest rate loans and they only charge penalty's when your late in paying them. The problem with increasing rates when people get into trouble is it tends to force more people over the cliff. Let's say you owe 20k at 10% and make 50k/year. You get hospitalized for 5k and your old and new rate becomes 33%. You have gone from a 2k /year to 5k/year when you need to borrow 5k more. If the company lending you 5k wants to charge you 33% interest that's fine you can focus on paying them back first and get free of debt but when everyone starts raising your rates while your in trouble it's almost impossible to get out of the hole. PS: Not to mention demonstrating a lack of good credit is an ill defined concept. Loss of a job reduces credit worthiness even if you make all your payments.
  - sokoloff 18y ago
    Concede the point on bonds held to maturity; you're right. Private student loans are variable interest rate loans, many at the whim of the providing company. (I'd agree that private student loans are much closer to evil than revolving credit, and that more education is due on both topics to consumers of both types of debt. But I'm still not in favor of restricting the availability of a financial product that might not be in any given consumer's best interest, so long as it is in the best interest of some consumer.) Govt-backed student loans are as you describe. As to the over the edge "problem", that's a problem of the consumer's making+, and a creditor acting in their own best interest probably OUGHT to tighten credit for borrowers that it identifies, even on an acturial basis using information unrelated to the direct consumer<->creditor interaction, as being a higher risk. + - Debtors who are not in over their head generally don't face these problems.
mynameishere 18y ago
What other product can you purchase, and have the price change after you purchase the product? Money is not purchased when it is loaned. It is rented, and lots of rented goods have rate changes.
- iamelgringo 18y ago
  If people rented apartments, and every month, the landlord was able to increase or decrease the ammount he charged for rent based on your "risk," people would riot. And, yes, money is rented via credit cards, but every purchase that I make with a credit card is in effect subject to a variable cost, because the interest rate that I'm being charged varies. So, I might buy a $1000 computer, thinking that I'll pay it off in on year at %10. If my interest rate suddenly goes up to %29, I'm now paying closer to $1300 for the computer that I was planning on paying $1100 for. And, furthermore, I have little recourse when my interest rates go up. I say that it's only because of the obscurity of the terms that people put up with this. If the same thing happened to people's car payments or rent payments, they'd be up in arms.
  - mynameishere 18y ago
    Yeah, well, if I enter into a contract with a landlord specifying that he'll change the rates as desired, TS for me. Get a personal loan at a bank and it won't vary.
lnguyen 18y ago
The credit card industry is already subject to a sizable amount of regulation: Truth in Lending Act, Fair Credit Billing Act, Fair Debt Collection Practices Act, etc. Granted, that's not to say the regs couldn't be better or start leaning more toward the consumer (especially those changes that happened with the bankruptcy "reform" a few years back) or that the agreements couldn't be written in more straightforward English. For the issues you've listed (interest rate changes, etc.), all of this information really is included in the agreement you're given when you sign up for the card. And the bank or CC company is supposed to mail out the updates to the terms levels whenever changes are made. You have a choice on whether to agree to those changes or to cancel your card. What usually happens instead, however, is that people just look at the glossy marketing brochure or whatever gimmick is used to promote the card (airline miles! cash back!). And of course, assume that nothing bad's going to happen. There's a lot to be said about not signing your name on anything that you don't fully understand. It's the same with any legal agreement: employment contracts, software EULAs, etc. [Full disclosure: I used to work at Discover.]
- LogicHoleFlaw 18y ago
  The problem with not signing anything you don't fully understand is that the corporate entity you're dealing with has dedicated lawyers on hand to draft and revise these things. I'm one guy who's trying to live life. I'm not a lawyer, and I don't have the time to decipher every EULA, every contract, every service agreement, and all the rest of the fine print that we wade through. Personally I try to hit the high points of standardized contracts but at some point you have to operate on trust. If some entity wants to screw you over, it can be done over subtle things.
  - netcan 18y ago
    I agree that contracts need to be written in a way that allows anyone aged 14+ to 'get it' in 2 minutes. But the problem here isn't information. People have that, one way or another. The problem is bad choices, starting with the choice to make an uninformed decision. My girlfriend once worked at a bank. They had a credit cards brochure with a comparison table. 4 or 5 cards had gimmicks: miniature cards, points, miles, gold card (virtually no actual benefit), personalised card, internet purchase insurance (for those that reckon themselves rational). 1 card was the right choice. Lower fees, lower rates, lower penalties. It was grey & ugly & had no fun stuff. No one ever picked the right choice. Those too sophisticated (old) to be swayed by something as dumb as a miniature card or fun points would be swayed by something with a little more mature like exclusivity (gold) or miles. Those making a rational choice pick the extended no interest period or some obscure feature like online purchase insurance or travel insurance or something else they think saves them money. Now these were all the good cards you get at a bank: 16%-19% interest rates. The low interest card was around 11%. Absolutely economical compared to what you get a furniture store. The crucial info wasn't in the small print. It was in a big glossy table. There was a clear right choice for anyone that hasn't had a card & never paid interest or late fees in the last 5 years. It was the least popular option. *prime interest at that point was 7.5%. There is no problem making a decent credit card with no frills. People won't take it.
steveplace 18y ago
What other product can you purchase, and have the price change after you purchase the product? Housing, stocks, commodities, pokemon cards, electronics. It's not a matter of education, IMHO. You're right, it's a matter of discipline. We can tell people to not play the lottery as your expectancy will never be positive, but they'll still be there, scratching the foil off with car keys. Note that the deceptive business practices don't help with enforcing discipline.

ars 18y ago

The price is not changing after the fact - you agreed to all the rates and changes before you start. If they want to change those in any other way then they have to contact you and you have the option to stop using the card and pay off the balance at the old rate. The agreements are not that complicated - people simply don't read. I see it happen all the time with website UI's - the instructions are right there and people never read them. You don't need to read the full agreement - everything you need to know about the rates is on the back of the application - in a format set by congress. How much more regulation do you need? Edit: apparently there is more regulation coming: http://www.ft.com/cms/s/0/d70973f2-ca0f-11dd-93e5-000077b07658.html?nclick_check=1 http://www.ft.com/cms/s/0/d70973f2-ca0f-11dd-93e5-000077b076...

sethg 18y ago
I can't find the page where I saw the numbers, but a staggering proportion of American adults don't know basic math well enough to figure out which grocery store has the lowest prices. I assume an even more staggering proportion doesn't really understand how compound interest works.
- eru 18y ago
  What do I care about dumb people?

sokoloff 18y ago

Student loans, personal loans other than credit cards, business loans, preferred stock, corporate, municipal and government bonds (from the issuer's perspective) all change price/rate in response to missed or late payments on other obligations. (In the latter case, often dramatically so.) Why shouldn't a lender be a able to offer a contract that allows them to increase their fees when the borrower shows themselves to be a less than ideal credit risk at some point in the future? The borrower signed the terms; if they didn't like them, they could have not signed them, or they can pay off and close the account now. Those are the two (non-bankruptcy) avenues for them to get out of the contract that they now don't like having signed.

Retric 18y ago
Bond's don't change rate when the company get's into trouble the cost of new bonds goes up. Student loans are normally fixed interest rate loans and they only charge penalty's when your late in paying them. The problem with increasing rates when people get into trouble is it tends to force more people over the cliff. Let's say you owe 20k at 10% and make 50k/year. You get hospitalized for 5k and your old and new rate becomes 33%. You have gone from a 2k /year to 5k/year when you need to borrow 5k more. If the company lending you 5k wants to charge you 33% interest that's fine you can focus on paying them back first and get free of debt but when everyone starts raising your rates while your in trouble it's almost impossible to get out of the hole. PS: Not to mention demonstrating a lack of good credit is an ill defined concept. Loss of a job reduces credit worthiness even if you make all your payments.
- sokoloff 18y ago
  Concede the point on bonds held to maturity; you're right. Private student loans are variable interest rate loans, many at the whim of the providing company. (I'd agree that private student loans are much closer to evil than revolving credit, and that more education is due on both topics to consumers of both types of debt. But I'm still not in favor of restricting the availability of a financial product that might not be in any given consumer's best interest, so long as it is in the best interest of some consumer.) Govt-backed student loans are as you describe. As to the over the edge "problem", that's a problem of the consumer's making+, and a creditor acting in their own best interest probably OUGHT to tighten credit for borrowers that it identifies, even on an acturial basis using information unrelated to the direct consumer<->creditor interaction, as being a higher risk. + - Debtors who are not in over their head generally don't face these problems.

mynameishere 18y ago

What other product can you purchase, and have the price change after you purchase the product? Money is not purchased when it is loaned. It is rented, and lots of rented goods have rate changes.

iamelgringo 18y ago
If people rented apartments, and every month, the landlord was able to increase or decrease the ammount he charged for rent based on your "risk," people would riot. And, yes, money is rented via credit cards, but every purchase that I make with a credit card is in effect subject to a variable cost, because the interest rate that I'm being charged varies. So, I might buy a $1000 computer, thinking that I'll pay it off in on year at %10. If my interest rate suddenly goes up to %29, I'm now paying closer to $1300 for the computer that I was planning on paying $1100 for. And, furthermore, I have little recourse when my interest rates go up. I say that it's only because of the obscurity of the terms that people put up with this. If the same thing happened to people's car payments or rent payments, they'd be up in arms.
- mynameishere 18y ago
  Yeah, well, if I enter into a contract with a landlord specifying that he'll change the rates as desired, TS for me. Get a personal loan at a bank and it won't vary.

lnguyen 18y ago

The credit card industry is already subject to a sizable amount of regulation: Truth in Lending Act, Fair Credit Billing Act, Fair Debt Collection Practices Act, etc. Granted, that's not to say the regs couldn't be better or start leaning more toward the consumer (especially those changes that happened with the bankruptcy "reform" a few years back) or that the agreements couldn't be written in more straightforward English. For the issues you've listed (interest rate changes, etc.), all of this information really is included in the agreement you're given when you sign up for the card. And the bank or CC company is supposed to mail out the updates to the terms levels whenever changes are made. You have a choice on whether to agree to those changes or to cancel your card. What usually happens instead, however, is that people just look at the glossy marketing brochure or whatever gimmick is used to promote the card (airline miles! cash back!). And of course, assume that nothing bad's going to happen. There's a lot to be said about not signing your name on anything that you don't fully understand. It's the same with any legal agreement: employment contracts, software EULAs, etc. [Full disclosure: I used to work at Discover.]

LogicHoleFlaw 18y ago
The problem with not signing anything you don't fully understand is that the corporate entity you're dealing with has dedicated lawyers on hand to draft and revise these things. I'm one guy who's trying to live life. I'm not a lawyer, and I don't have the time to decipher every EULA, every contract, every service agreement, and all the rest of the fine print that we wade through. Personally I try to hit the high points of standardized contracts but at some point you have to operate on trust. If some entity wants to screw you over, it can be done over subtle things.
- netcan 18y ago
  I agree that contracts need to be written in a way that allows anyone aged 14+ to 'get it' in 2 minutes. But the problem here isn't information. People have that, one way or another. The problem is bad choices, starting with the choice to make an uninformed decision. My girlfriend once worked at a bank. They had a credit cards brochure with a comparison table. 4 or 5 cards had gimmicks: miniature cards, points, miles, gold card (virtually no actual benefit), personalised card, internet purchase insurance (for those that reckon themselves rational). 1 card was the right choice. Lower fees, lower rates, lower penalties. It was grey & ugly & had no fun stuff. No one ever picked the right choice. Those too sophisticated (old) to be swayed by something as dumb as a miniature card or fun points would be swayed by something with a little more mature like exclusivity (gold) or miles. Those making a rational choice pick the extended no interest period or some obscure feature like online purchase insurance or travel insurance or something else they think saves them money. Now these were all the good cards you get at a bank: 16%-19% interest rates. The low interest card was around 11%. Absolutely economical compared to what you get a furniture store. The crucial info wasn't in the small print. It was in a big glossy table. There was a clear right choice for anyone that hasn't had a card & never paid interest or late fees in the last 5 years. It was the least popular option. *prime interest at that point was 7.5%. There is no problem making a decent credit card with no frills. People won't take it.

steveplace 18y ago

What other product can you purchase, and have the price change after you purchase the product? Housing, stocks, commodities, pokemon cards, electronics. It's not a matter of education, IMHO. You're right, it's a matter of discipline. We can tell people to not play the lottery as your expectancy will never be positive, but they'll still be there, scratching the foil off with car keys. Note that the deceptive business practices don't help with enforcing discipline.