New Credit Card Terms Cause New Disputes

Michelle Singletary
Thursday, May 28, 2009; 9:48 AM

I was deluged with e-mails from many credit card users who were incensed at my recent column.

Honestly, you would have thought I called their mama a name. Sadly I was called a lot of names -- none of which was the one my mama gave me.

And what did I do to deserve such ire?

I wrote that perhaps those who have been patting themselves on the back for avoiding interest charges and fees on their credit cards have enjoyed using other people's money because the credit card companies have gouged less fortunate folks.

What some readers thought I said -- in their heated rhetoric to label me a "lunatic liberal" -- was that I was advocating that it was the duty of those who live frugally and within their means to pay the bills of those who do not. (That's how one reader put it.)

My intentions were not to chastise people who have acted responsibly with their finances. Instead, I was merely pointing out the predatory way credit card companies have created a two-tier system, which allow some to enjoy short-term loans with little cost, while taking advantage of others.

Here are some responses to my column proving that you can make your case intelligently without using profanity or ugly insults:

"As one who has always (after college years) lived within my means, I must object to your statement that we are benefiting at the expense of those who do not control their spending, wrote Jack Prosek of Pleasant Hill, Calif. "Our three daughters have been taught that the surest way to have no money is to keep paying monthly interest charges on credit cards."

John McClain of Arlington, Masss., wrote: "I always pay my balances in full and, with one exception, have only cards with no annual fee. This doesn't mean I'm getting a free ride however. The banks get a cut from everything I spend. Of course that comes directly from the merchant, but you don't think it's included in the price I pay?"

Actually I do think it's included in the price we all pay. Read today's column, We All Pay for the Privilege of Paying With Plastic, which continues this discussion.

Doug Kirby in Davie, Fla., is confident that if the credit card industry tries to create new charges for customers Congress will again step in. "If the credit card industry tries to find new ways to rip-off consumers Americans will have Congress and President Obama pass even more strict laws to prevent their new and updated unfair practices to be inflicted on credit card users."

Elise B. Hoffman of Andover, Mass., wrote: "When the time comes and the credit card companies try to charge me an annual fee or some other way to make up for their previous gouging of 'revolvers' and 'late payers,' I will say no thank you, close the account and either go elsewhere for a no fee card or use a debit card."

Some people, however, did understand what I was saying:

"Thank you for highlighting the truth about the predatory credit card situation in a meaningful way," said Sophia Tesch of Mesa, Ariz. "It is so easy for people to say with all the social programs around, why do the poor stay poor?"

"It never entered my mind," wrote Scott McNeilly of Bridgewater, Mass., "that access to free money is made possible by charging people penalties and double-digit interest. I have no doubt that credit card companies are gouging low-income users."

The Future of Credit Cards

Economic policy blogger Ezra Klein also received some pushback when he wrote that the credit card industry's tiered model is a subsidization scheme. Take a look his post: The Credit Card Bill Could Be Bad for Those With Good Credit -- And That's Okay.

Klein wrote: "Low income credit card holders effectively subsidize high income credit card holders. The financially illiterate are gamed so the financially literate can pay very low fees. Flattening that business model out a bit would make a lot of sense."

Local reader Kathy Maynor of Herndon, Va., pointed out the blog post in an e-mail to me. She wrote: "Between you and Dave Ramsey, I may yet dig myself out of the hole I've gotten myself into. I don't know if you saw this, but one of your coworkers has seconded your article stating that people who have been getting 'free' credit have been doing it on the backs of the less fortunate."

Klein followed his posting with more on the issue here: Are Debit Cards the Future?.

In referencing another blog, Klein pointed out credit card industry insiders who noted that credit card holders who pay their bills off every month and reap reward points and bonuses are only "mildly profitable."

If you've got the time, read his blog entries -- and comments. This is an interesting debate and one that will impact all of us who use credit cards. For now, we wait to see how the new credit card law will change how the industry treats us all.

Will there be a return to annual fees? Are grace periods on credit cards be taken away? Will debit cards become the new great plastic?

Credit Card Legislation 101

Would you like to know the details of the new credit law? Post personal finance reporter Nancy Trejos and artist Patterson Clark constructed a fantastic breakdown of the new provisions in Change Is Coming to Your Wallet (May 24).

Take a look at a few of the conditions.

* Late fees will not be charged if the issuer delays crediting the payment.

* Penalty fees will have to be reasonable and proportional to the violation.

* People under 21 years of age will need a co-signer or provide proof of income to qualify for a credit card.

For more details on the legislation, continue reading here.

Anniversary Calls for Reflection

Deals columnist Allan Sloan wrote that the financial nightmare began two years ago on June 12, 2007, with the meltdown of two Bear Stearns hedge funds. Since then, giants such as AIG, Lehman Brothers, Royal Bank of Scotland and Bear Stearns have tanked.

With this anniversary date approaching, Sloan said, "Let's look at what the meltdown is really about, the underrated impact of Lehman's collapse, and where we go from here."

Read more of Sloan's take on why we're in this recession in An Unhappy Anniversary for the Financial Crisis (May 26).

You are welcome to e-mail comments and questions to Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.

© 2009 The Washington Post Company