You get better deals from loan sharks. The Wolfs are among a growing number of bank cardholders feeling the sting of penalty interest rates and fees adopted by major credit card issuers in the past few years. Since fierce competition among issuers has forced them to offer ever lower interest rates and kill annual fees to lure new accounts, issuers must make up their profits elsewhere. The issuers say cardholders who follow the rules enjoy lower interest rates and those who don't pay a price. But consumer advocates say the new penalties are excessive and push already cash-strapped consumers deeper into debt.
Critics say the penalties also amount to changing the rules in the middle of the game.
D.C. Dale Wells of Ellicott City, Md., would certainly agree. Opening his credit card statement from Chevy Chase Bank in October of 1997, Wells was outraged to learn that his interest rate had been jacked up 10 percentage points to 26.7 percent. When he complained, the bank informed him it had raised his rate because he had negative information on his credit report. Banks may deem a cardholder a greater credit risk if, for example, he has too many credit cards with balances and too many open lines of credit. But Wells says he doesn't know what propelled him into a higher risk category or even whether he is a higher risk at all.