Credit Card Madness


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Thursday, August 20th, 2009

I got an interesting notice in the mail from Sears Credit Card Services last week. It came in the form of one of those fold, seal and mail thingies within which I have often found checks from various places in the past. I was intrigued and opened it immediately.

“Dear Valued Customer” it began. Uh oh. In my experience whatever follows those words is not good news. I had no idea how right my instincts on that would prove to be.

I read on.

“Currently, the credit card industry is facing unprecedented market conditions. As a result of this challenging business and economic climate we are making changes to your Card Agreement. We value you as a customer, and we’re working hard to preserve the broad availability of credit.”

Maybe I was being too cynical, I thought. I am a valued customer and they should be falling all over themselves to keep me happy. After all, the people at the Equifax credit reporting agency had recently told me I was among the top five percent of people in the country in terms of my credit worthiness. Maybe they really meant that “Dear Valued Customer.”

I read on.

I’ll spare you all the boilerplate language, but the gist of it was that the interest rate on my Sears Mastercard will be jumping to the “U.S. Prime Rate plus 21.99%” beginning next month. That means the interest rate on my card will be 25.24%.

That means the interest rate on my card will effectively be doubled next month. Never a late payment or any other blemish. It seemed, shall we say, a bit excessive.

But there was more.

Should I want to get cash using my credit card the interest rate will be jumping to 27.15%, but it doesn’t stop there. There will also be a 5% transaction fee for cash access. The minimum on that transaction fee, which used to be $5, is jumping to $10.

The notice then went through a whole host of what it considers cash action transactions, which included using my card to buy lottery tickets or casino chips.

Finally, toward the very end written in big, bold type were the words “Right to Opt Out.” All I had to do to opt out was call a toll-free number or send a letter to some post office box in Sioux Falls, SD.

That doesn’t sound so bad, I thought for a second. I can just “opt out” and everything will just go on as it has in the past. Then I read the final two sentences.

“If you opt out of these changes, we will close your account, unless it is already closed. You must then repay the balance under the current terms.”

I gotta tell you, I was suddenly not feeling like such a “Dear Valued Customer.” I will be “opting out” with a vengeance.

Finally, as if to add insult to injury, I noticed a little “Citi” logo on the notice. It turns out that my Sears Mastercard has in reality been a CitiGroup Mastercard.

That would be the same CitiGroup that has received $45 billion in government bailout money over the past year. I’m going to go out on a limb here and guess that CitiGroup isn’t paying 27.15% interest on the cash infusion it has gotten from taxpayers.

Behold the Madness! (PDF)

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