Romancing the credit-card holder

Congress is looking hard at how credit-card issuers do business. Issuers are responding with sweeter deals.

By Margaret Price | Contributor to The Christian Science Monitor

from the June 18, 2007 edition

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New York - The next time a credit-card offer comes in the mail, it might be worth looking to see if the terms are any friendlier.

For example, Chase Card Services elected early this year to scrap the arcane practice of two-cycle billing, in which the average daily balance is calculated over two billing cycles instead of one. The extended duration can result in higher finance charges for those who carry a balance on their card.

In March, Citigroup announced it was dropping two of its credit-card practices: hiking a card customer's rates and fees at "any time for any reason," and the practice of "universal default," where interest rates on a card can be jacked up if the cardholder fails to pay any other bill on time.

And in June, Chase and Bank of America announced programs to help customers better understand and manage their accounts.

To credit-card issuers, the new offerings are designed to please customers. But to skeptical observers, the moves are viewed as efforts to thwart a possible government crackdown.

Amid a raft of complaints about card issuers' practices, the Democrat-controlled Congress has stepped up its focus on cardholders' concerns. The results so far this year: various bills introduced to curb perceived abuses, and several Congressional hearings.

At one hearing in March, Wesley Wannemacher told lawmakers how he went over the $3,000 credit limit on his new Chase credit card in 2001, spending $3,200 to pay for his wedding. Evidently, the charges weren't paid off promptly, and his debt began to pile up. In all, Mr. Wannemacher, of Lima, Ohio, racked up fees and interest charges of $7,500, including 47 over-the-limit fees. And "if they hadn't reviewed my account, I would have paid another $6,110 on a $3,200 debt," he stated.

The reaction to his story was swift: At the hearing, Chase announced it would end over-the-limit fees on accounts that exceeded their credit limit for more than 90 days.

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