BBB warns consumers of threats as banks raise rates
From press release
Banks are increasing credit card rates and fees next month, an action many consumers have forgotten about because it was approved eight months ago. While consumers can shop around for a better rate, there may be little they can do about the increases, other than be aware of them. Consumers need to especially guard against scammers using these increases as an opportunity to steal personal information from those looking for better rates.
“Many banks are changing interest rates and fees before a new set of laws designed to protect consumers will go into effect in February,” explains Dennis Horton, director of the Rockford Regional Office of the Better Business Bureau (BBB) of Chicago and northern Illinois. “This legislation was passed so long ago that most consumers have forgotten the increases are coming.”
Horton noted that: “Ironically, the increases banks are instituting because of upcoming consumer protection laws are being used by scammers as an opportunity to steal consumer identity information and use it to commit fraud later on.”
The typical scam procedure we hear from consumers is that they receive calls from organizations promising lower credit card interest rates, Horton noted. To accomplish this, the callers say they need personal information, such as the consumer’s Social Security number, bank account number and other data.
“The only thing consumers who fall for this scam will see lowered is the amount of money in their bank and other financial accounts,” said Horton.
The BBB offers the following advice that consumers can take both short-term and longer range to help them obtain lower rates.
Contact your credit card company. While most interest rate hikes affect only customers who carry a balance, some customers in good standing have seen their rates increase as well. Anyone who believes their rate was increased by mistake should contact their credit card company. There is evidence that credit card companies might be willing to negotiate rates to keep cardholders as customers, so it doesn’t hurt to contact the company and discuss options.
Pay off the account. If the cardholder doesn’t want to accept the new rate, he can choose to keep his current rate and pay off his outstanding balance, as long as he doesn’t make any new purchases. If any new purchases are made, the higher rate will be enforced.
Find a better deal elsewhere. Other credit card companies might be offering better deals, such as low introductory rates that will give the holder a less expensive way to pay down debt. Shopping around may provide you a better deal.
Manage credit responsibly. According to banks, most rate hikes affect people who maintain balances on their card or have rates that are too low for the market. Therefore, one of the best ways to avoid a sudden interest rate hike is to use credit cards responsibly, which includes paying bills on time and not carrying a balance.
“Consumers should never give personal or financial information on the telephone, unless they initiate the call, and know and trust who they are talking to,” explained Horton.
Consumers should wait to receive information from their banks concerning any rate and fee changes, Horton said. Once they have this information, they should contact their financial institution directly to discuss and negotiate a lower rate directly.
For more information, visit www.bbb.org.
From the Jan. 20-26, 2010 issue
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