HIGH INTEREST RATES - AN EYE OPENER
On a cold day in January, we received a notice from our bank that they were changing the terms of our credit card agreement because of a turn in our credit status. This aroused us to no end: we were not aware of any change in our credit status. So we wrote to our bank asking that they be more specific about the change in our credit, sending a copy of the letter to the bank Chairman. Sure enough, about a week later we got a call from our bank, followed by a letter stating that a mistake had been made and that they were reversing themselves on the Change in Terms on our credit card agreement. We were pleased with their decision to reverse themselves, but were concerned about what did (or could) happen to us. Here is our concern: With respect to the Change in Terms, if we take the Before (with Annual Percentage Rate (APR) at 4.75%) and After (with APR at 22.0%) situations, assuming a minimum monthly payment at 2.0% of the outstanding balance (initially $10,000) or $20, whichever is larger, and calculate the monthly payments for each situation, we get the following results:
Change in Terms
Total of all monthly payments Before $12,353 After $110,752
Total interest paid
Number of years paid
$2,353
16.5
$100,752
126.4
There sure is a big difference in the two situations. In fact, the After is so unreasonable; it doesn’t even seem real. Yet a number of people are in this After situation.* We almost were and could be somewhere down the line. Can something be done about this After situation? For example, a more reasonable limit on the maximum APR? Also, a minimum payment of one-half the initial payment instead of $20? This is something that must be done by legislation because it requires a change in the (usury) laws. Please CONTACT your Congressman/Congresswoman.
Thank you, Chuck & Mary Jo Johnson
*This could have a negative effect on the economy: For example, less money for the purchase of goods and services.