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January 13, 2013, Bedford, NY
by Jonathan Winter
This is a quick note, mainly because I’m so infuriated that I had to vent. I received a credit card “offer” in the mail yesterday from a bank in Omaha. The very top displays the following:
Nothing beats a FIXED rate for life. $9.99% – No Annual Fee
Now 9.99% is not great, but for a credit card that has no annual fee this gives the cardholder “Argentina style” options: if some time in my lifetime something goes horribly wrong in the US: the US dollar goes third world, we go over a fiscal cliff, we’re downgraded by rating agencies, stagflation like in the 1970s/early 80s occurs, you get the point.
Now anytime I get one page of application with two pages of tiny print disclaimer I know that the offer is not as it seems. but when something says:
Nothing beats a FIXED rate for life. $9.99% – No Annual Fee with no asterisk ” * ” next to the APR
I at least need to read the fine print…
And I did. It contained the standard “we can raise your rate” clauses that will cause 99% of the customers out there to trip up at some point: one day late, one dollar short, etc. Most of these are actually fair, because if you’re late and/or short on your payment then the credit card company assumes (in many cases rightly so), that your willingness to repay has dropped – I digress, back to the fine print.
The next line is the killer:
IMPORTANT NOTICE REGARDING CHANGE IN TERMS: We reserve the right to unilaterally change all rates, fees, costs and other terms for any reason.
then it goes on to say:
If any interest rate is labeled “fixed” that rate will not increase for any reason during (1) its specified duration or (2) the life of the applicable balance or account if either the duration is specified or the duration is indefinite.
Now I’ve been called a pretty smart guy, CPA, MBA, etc. but when someone says: we can raise your rate for any reason, but we will never raise your rate I get confused. So I called customer service. First they wanted me to apply before they’d give me the interpretation (which is still not official, but at this point I knew I was going to write this note so needed something). Finally I got to the answer: “Well, technically we can raise your rate at any time, but outside of late payment, we will only do so if 1) you stop spending, or 2) you leave the balance on the card for too long…”
Ok, so they lied.
That is exactly what someone reading this offer would want to do! They would not care if the rate was 25% if they always paid their credit card balance off every month, and they’d only leave a balance on if they had no better options.
The bottom line is this, when you get an offer that look too good to be true, it usually is. If you’re like me and read the fine print (by the way this is where the offer stops becoming advertising and starts becoming the real thing) and there is any language that benefits the provider or seller, assume if there is confusion that the conflicting language was put in there to give the company the option to change their mind.
Until next time