The latest from our banking friends: a credit card with no credit!

[regnaD kciN]

For years, I've carried a BofA MasterCard, generally with no balance. Basically, it's for emergencies, to be paid off ASAP. For example, last year, after my old Honda died, I used it to put a $2,000 deposit down on another used car until I could actually get the cash to buy it flat-out. Once I had the cash, the card got paid off that very day, along with the rest of the cost of the car.

Of course, right after the 2008 "credit crunch," BofA cut my credit limit in half, even though I had maintained a zero balance on it for several years. And, a couple of years before, likewise with a zero balance, they hiked my APR to 25%. But, as long as I had enough of a credit limit to cushion any anticipated emergencies, I wasn't too concerned. After all, even in a worst-case scenario, I'd generally be able to pay off the balance during the grace period, so interest charges didn't worry me at all.

Well, today, I got one of those "Important Account Information" letters that generally mean a new shipment of credit card checks to be shredded and dumped in the recycle bin. However, this time, it was something completely different: the "good news" that "as a valued customer in excellent standing, you have been selected to upgrade your account to the BankAmericard Power Rewards World MasterCard credit card." I was informed, in fact, that this upgrade is "automatic." It includes a "great package" -- specifically "a higher level of benefits, including no preset spending limit*." The asterisk, of course, led me to a whole block of fine-print legalese on the back of the letter, including this "great benefit":

As a result of this upgrade, your account will have a revolving line, rather than a preset spending limit. This does not mean that all transactions will be approved. We will consider transactions for approval on an individual basis, including transactions in excess of the revolving line. If we have previously permitted transactions in excess of your revolving line, it does not mean that we will permit another transaction in excess of your revolving line. Your revolving line, which may also be referred to as a credit limit, will be disclosed to you when you receive your card and, generally, on each monthly statement. We may change your revolving line from time to time.

Got that? Although you will have a credit limit...oh, excuse me, a "revolving line," they will decide whether to approve any transaction "on an individual basis," even if it's under, or even well under, your revolving line credit limit. It doesn't seem too hard to figure out how this will be used: as long as that charge is for a new big-screen, or a Caribbean vacation, or something that looks like a luxury, fine! But if it's for a hospital charge, or a utility bill, or a grocery purchase...or, for that matter, anything that looks like you may be having to use credit for necessities, you're going to be SOL, because they have the right to refuse any transaction on a whim. Even if you've got a $20K credit limit, and this charge is for a few hundred (or less) -- well, you really haven't got a "preset spending limit" at all, so who cares if they suddenly decide your "revolving line" is to be instantly reset to $0?

You know, it's always said that the sole justification for owning credit cards at all is just for use in emergencies -- but this new "benefit" seems to me designed to make sure that, any time you have such an emergency, you will be at the mercy of the bank as to whether you're allowed to use them for that purpose, even if you have the credit limit to allow it. So, I have to ask, what's the point at all?

:shrug:

[msongs]

1. time to dump B of A, which is only getting away with what congress allows it to get away with nt

[lame54]

14. way ahead of you my friend

[Orrex]

2. Will they charge a fee for transactions declined under the "revolving line?"

These geniuses may have tapped into a gold mine!

[RKP5637]

3. I dumped BOA a long time ago. I think they are a crap company. n/t

[Hannah Bell]

4. that is a set-up to collect more fees -- mark my words.

god.

just listening to parenti talk about how the fundies are obsessed with near-non-existent proscriptions against gay sex in the bible, but completely ignore the many, explicit bans on usury, robbing the poor, etc.

usury used to be defined as "over 7%."

i'm old enough to remember when the rates legit card providers charge were consider loan-shark rates.

i guess the loan-sharks are out of business?

[xchrom]

6. I think the bible says 6% -- and +1 for everything else you say. Nt

[Hannah Bell]

15. the 7% used to be the law, nothing to do with the bible.

[Skink]

5. Life sucks when you have to use a credit card to eat.

[eridani]

20. Not really. Putting expenses on a credit card is more convenient than checks

Debit cards are much more likely to have identity theft and other frauds.

[napi21]

7. I would contact another CC co. and get a different CC, THEN dump

the btd's! I never trusted them and never had an account with them. They're trying to get rid of the pay every month & low use custoers fr mor profitable ons.

BTW, I wouldn't cancel the B ofA ard. That only reduces your credit score. Only use the B of A card for a small $5-$10 purchase once every six months or so and pay it off right away. That way they can't cancel it for non use.

[abelenkpe]

8. Change banks

Do you have to do business with B of A? Are there no credit unions close by available to you? Can you maybe open an account with a new bank or better credit union and then stop doing business with B of A?

I once had a credit card with a very high limit. Had the card since 87, impeccable credit rating, always paid off every month. B of A took over the bank and sent me a note welcoming me to the bank and detailing the new terms. They were going to add a new annual fee of 75 bucks and charge me 35 a month for not carrying a balance. Yay, don't use your card and get charged. That makes so much sense. I called them up and said no thanks which is a nice way of saying f-off you sleezy leeches.

I just use our credit union card now. But mostly I use cash.

[regnaD kciN]

9. I've got my main accounts with a credit union...

...and was just keeping this card for emergencies. As I understand it, the credit union does offer credit cards, but with a very low credit limit, so probably not enough for something like a medical emergency or a natural disaster that would us homeless. (Don't laugh about the last one -- we live in earthquake country, and have already had windstorms bring down two 100' trees on the house and yard.)

[Donnachaidh]

11. talk to the credit union about the limits - I'll bet they will work with you if you have

a good history of paying back charges after emergencies. They want your business - they benefit from drawing away good customers from banksters like BofA.

I wouldn't rule them out without talking to them first.

[eridani]

21. The limits depend very much on your previous history and your income

I have a $23,500 limit on one credit union VISA and $7200 on the other one. They didn't change the limits after I retired and had my income cut in half either.

[Recursion]

10. The terminology still bugs me

"Credit card" = card that grants you debt

"Debit card" = card that gives you credit for money in your account

Something is Orwellian here.

[Statistical]

17. The reverse is also true.

"Credit card" = bank extends you credit.
"Debit card" = bank debits your account of the amount purchased.

[unblock]

12. the "no preset limit" was always something amex touted going way back

the truth is that you have a credit limit, they just don't tell you what it is.
and with pretty good reason, because they use an algorithm that changes your effective limit on-the-fly.

for instance, if you book a flight and a rental car and a hotel in a business district, they presume you're on a business trip and will be reimbursed so you can charge up quite a lot. but they might not approve half that amount if it's all consumer goods.

this sort of card has advantages, particularly if the above scenario may play out for you, they might approve you for much higher than any blanket limit they could offer you (ignoring what and where you're purchasing).

on the other hand, yes, it also gives the bank the flexibility to quietly lower (or increase) everyone's effective limits without notice based on their own balance sheet.

if you want the comfort of knowing what your fixed limit is, then you can ask if it's possible to decline the change and/or of course you can switch to another card.

[regnaD kciN]

13. The difference with AmEx...

...is that it's supposed to be a charge card, not a credit card. In other words, you're supposed to pay off the balance each month (although, in recent years, they introduced optional terms that would allow you to treat it as a credit card).

[Statistical]

16. If you want you can request a limit instead. No preaproved limits are generally for highest credit

So you can
a) close the card
b) call customer service. They likely will explain you car has a revolving line of like $20,000. Charges below $20,000 are never denied. Over that they "may aprove it".
c) request fixed limit instead. They gladly will downgrade you to a fixed limit card.

I would recommend c. No spending limit cards hurt your credit score. It is somewhat complex but a factor in your credit score is credit usage. $1,000 in charges on $10,000 limit = 10%. The problem with no pre-set limit cards is that there is no limit. So credit agencies will use your largest purchase as the "max". Thus the max you put on the card is $2,000 today it has $1,000. $1,000 / $2,000 = 50% when in reality the max you could put on it is $20,000+.

[Duke Newcombe]

18. Fuck them. Fuck the banks. Fuck them all.

That is all.

[eridani]

19. Get a credit card from a credit union

I've had not a single batch of "checks" in my mailbox since then. Much more reasonable rates and decent credit limits too.

[formercia]

22. My CU rate is 6.5%

Been a CU customer since 1993.

[adamuu]

23. I'd like to cancel all my cards (0 balance, emergency only)

since they have proven themselves not necessarily available in an emergency. As you say, what's the point. But, I worry that closing the accounts, some of which are over 10 years old, will negatively affect my credit rating.

Last time I called BoA for a routine question, they offered me a mortgage. I rent. Ummmm how about no.