Cardholders pay now for ‘10 credit rules

Mary McNulty and John McGraw don’t charge much on their credit cards anymore.

They pay upfront for what they need - though Mrs. McNulty, of Cockeysville, Md., still uses a store card for her prescriptions.

Credit-card issuers are raising their rates, cutting their credit limits and increasing minimum payments for what Mrs. McNulty calls “arbitrary” reasons.

Consumer advocates say the companies are increasing interest rates across the board ahead of a landmark credit-card-reform law that prohibits rate increases on existing balances in good standing. The companies are also devising “tricks” that appear to conform to the new law but could trap consumers in debt, advocates say.

The law takes effect in February.

Mrs. McNulty, 61, and Mr. McGraw, 31, both have long-term balances they’ve been paying down faithfully at a fixed interest rate for years - stemming from a divorce in Mrs. McNulty’s case and tuition bills in Mr. McGraw’s.

Three years ago, around the time of her divorce, Mrs. McNulty took out $20,000 in cash advances from a Citibank card at rates as low as 2 percent. Then she took advantage of another offer by transferring $8,000 to a JPMorgan Chase card.

She has been paying off the debt faithfully each month and is down to a $7,000 balance on her Citi card and $1,900 on the Chase card.

Both companies have been flexible with her due date since she depends on monthly alimony checks from her husband, she said. Citi has not raised her low promotional rates. To the contrary, it has increased her limit and sent her checks to encourage her to borrow more - at higher rates.

But Chase raised the rate on her balance transfer from 8.99 percent to 12.99 percent. She was able to “opt out” of the increase, meaning she could continue paying off the balance at her previous interest rate, but that her account would be closed if she did so.

Since a closed account is a red flag in the eyes of credit-scoring agencies, one day in the mail came a statement about her SunTrust Visa bank credit card - which she doesn’t use - saying that her rate would be changed from fixed to variable as a result of her decreased credit rating.

Mr. McGraw, of Gaithersburg, Md., used his money to earn a degree in electrical engineering. He said Chase has been consistently lowering his credit limit - once so much that the monthly finance charge would have triggered an over-limit fee and cost him his low promotional rate.

Fortunately, he checks his account twice a week and was able to quickly pay down his balance to keep himself under the lowered limit.

Chase has also raised his minimum payments on a card with a low-rate balance but kept a low minimum payment on a card with a higher-rate balance.

“They are obviously trying to only speed up payments on low-rate, locked-in cards. I still have pretty big balances at these low rates, and some of the things they’ve done to try to shake me out of them have been pretty shady.

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