The offer from his credit card company last year was too good for Bob Leonard to refuse: checks he could use to borrow money at 3 percent interest and a promise the rate wouldn’t change “until the balance is paid off.’’
So for an upfront fee of 3 percent, the 47-year-old software executive used the checks to charge nearly $40,000 to his credit card for renovations to his home in Medford.
But then the card company, JPMorgan Chase & Co., hit him and more than 300,000 people who took the promotion with an additional $10 monthly service charge beginning in January. Chase also more than doubled the required minimum payment, from 2 percent of the monthly balance to 5 percent, increasing Leonard’s minimum to more than $1,500 per month, from about $600.
So Leonard drew down a home equity line of credit he had with his bank to reduce the amount he owed Chase.
“Apparently they don’t give a hoot about good will,’’ he said. “I’m done with Chase.’’
A Chase spokeswoman said the increase in minimum payments was necessary because some borrowers of the promotion were taking too long to pay off their loans. The company, said spokeswoman Gail Hurdis, is being a “responsible, careful lender.’’
Chase is but one of a number of major credit card companies that are jacking up interest rates and fees, or laying the groundwork to do so, before new federal legislation that cracks down on some of the practices goes into effect in February.
Bank of America, Chase, and Discover Card have switched many of their cards from fixed to variable interest rates that are tied to an underlying index. But since benchmark indexes are extremely low - the prime rate is near zero - analysts said credit card interest rates will almost certainly go up in the future.
Fees on foreign transactions have also increased. In May, Discover enacted a 2 percent foreign transaction fee. And some companies, including Bank of America, now levy a 3 percent transaction fee even if you buy an item online in US dollars, such as airline tickets, if the company happens to be based overseas.
Chase also recently raised the fee for balance transfers by 2 percentage points, to 5 percent of the amount moved. Others increased the rate by one percentage point.
Increases in credit card fees are not new. Credit card companies reaped $19 billion from late fees and other penalties on consumers last year, up 78 percent since 2003, according to R.K. Hammer, …
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