Paul Baker was smacked with a rude surprise when he opened a notice from his bank informing him that his minimum monthly payment had skyrocketed from $560 to more than $1,300.
The 31-year-old Stephenville man didn't have one of those toxic subprime mortgages with a teaser rate that suddenly reset. It was a Chase Freedom credit card.
"The payments are now bigger than my mortgage," said Baker, who used the card to help fund his educational-toy business.
Chase didn't alter the 4.9 percent interest rate. Instead, it ratcheted up his minimum payment from 2 percent of principal to 5 percent.
Baker is not alone.
Major banks are scrambling to cull their least profitable cardholders by making terms difficult or by raising interest rates before the new credit card reform bill takes effect Feb. 1, said Mitch Franklin, an assistant professor of accounting at Syracuse University’s Whitman School of Management.
"I know people who have 800 credit scores getting their line of credit cut," Franklin said in a call from New York. A credit score over 750 is generally considered strong.
Aside from higher rates and increased minimum payments, consumers have complained of fixed rates being changed to variable rates; new fees; a decline in new offers; and fewer rebates and rewards, said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.
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