Secret History of the Credit Card
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What are your views on  the techniques used by the credit card industry to earn record profits and get American consumers to take on more debt?
handing over a card [photo]fico score screen [photo]interest rates [photo]computer screen [photo]

Dear FRONTLINE,

I paid a Sears Roebuck credit bill late - just plain forgot. The balance due was a whopping $25.00. I was hit with a $40 late fee. I challenged Sears. They had no sympathy for my excessive late fee complaint. So, I did the only thing I could do. I cancelled the card, and have not set foot inside Sears Roebuck since, and I never will again. I have one and only one credit card left, and the balance is paid in full every month.

Mike Hartmann
Boonton, NJ

Dear FRONTLINE,

As others have previously mentioned, this program was extremely one-sided. I worked at one of the largest credit card issuers for six years, and while I will admit that there are some flaws to the industry, they are not the evil that was portrayed in this program. I also was surprised at what was either a lack of knowledge or a lack of research by the Harvard professor in likening credit cards to mortgage loans. The two couldn't be more different. If you don't pay your mortgage, your house will eventually be taken from you. If you don't pay your credit card, there is nothing that the credit card bank can do to recoup the loss if the customer is unable to pay. Hence the reason many credit card issuers will charge higher interest rates to riskier customers. It is one way that they can try to recover some of the loss up front before the entire debt is written off as uncollectible. I do, however, agree that these interest rates should be capped off at a much more reasonable ceiling than is the case today.

Another thing that was not mentioned on the program is that credit card companies (or at least MBNA) will try to work with customers to get them out trouble when unfortunate situations do arise. The collectors, by and large, are extremely customer friendly and try to find a solution not only for the bank but one for the customer as well.

Finally, a credit card company is not a "non-profit" company as we well know. However, nor is a grocery store, jewelry store, drug store, etc., etc., etc. They all mark up their prices to make money...so why don't we run a special on the hidden secrets of grocery stores?

Tina D
Westfield, MA

Dear FRONTLINE,

This is the opposite of "Bonnie and Clyde", this is the story of how the banks have been stealing from the people. Thanks for doing such a great job of telling the story.

Peter Murphy
Ardsley on Hudson, NY

Dear FRONTLINE,

Thanks for this huge wake up call here at Christmas. My husband and I have decided not to buy unless we can pay in cash. Although we both have college degrees we were never taught money management. We aren't in trouble right now, but this has incouraged us to seek out credit counciling to keep us on the right track. Thank you!!!!

Kelly I
Raleigh, NC

Dear FRONTLINE,

I have now seen this show three times and wish is was played more often to reinforce with all of my friends the way credit cards really work.

One topic in the show not explicitly discuss was evident in the way Andrew Carr, the consultant interviewed, acknowledged his two innovations, lower monthly payments and lower interest rates. In both cases he explicitly described the justification to his clients as the feelings and emotions evoked upon the user. In one instant he declares that a user feels financially prudent if they can make the monthly payment. Thus, the lesser the payment, the more prudent.

In fact, the user is not being financially prudent; the user is exemplifying their stupidity. Carr portrays his and the industries philosophy; simply, take advantage of the consumer's stupidity.

What needs to be understood about contract law part is not as complicated as may be portrayed. The industry provided the user with the agreement. Before the arguments can go any further, the industry is protected by saying it is not their fault the user did not read the agreement. As long as it is all in print and somewhat understandable, they're protected. Again, the industry has taken advantage of the user stupidity, `who's going to read this!".

Though the word stupid may be harsh and offensive, what word would you apply to someone who activates a credit card with a 5k limit and made no attempt to look at the contract? Whatever word you pick, that's how the industry operates.

What's the solution? Not regulation! The only solution: the free market; we do not have to use their product. As much as the industry has taken advantage of and thrived in a free market...the consumer's lack of use will be the only means to correction. Remember the word so frequently used in the show....revolving....stop revolving and the executives will start jumping out their office windows.

The fact is, for all of us, and your lying if you deny this, credit is to easy to use. We buy things we don't have and more importantly don't need. How many vacations are taken not for the sake of the vacation but rather to indulges one's persona. I bet these types of vacations are on credit and paid over time with interest and maybe one or two fees along the way. Just about anyone can charge a vacation though Madison Avenue wants you to feel different.

Simply, stop revolving and the industry will fix itself. I believe your reporting showed us not how many families/individuals that have been destroyed by credit but more importantly how many families/individuals never seek their full potential because of the burdens of credit. How did I find this message in the show, simple, who hasn't once been captured by the claws of the industry? If only I hadn't.......?

Thanks Frontline! One of the greatest reports ever!

Next, I wish those responsible for this show would do a similar report on the investment industry. How much of the investment profits, if any, trickle down to the investor? Call up a retirement planner, have him sit down with you and see if he/she advises you to pay off your debts (mortgage) before investing. Do the math.

In this show about the credit card industry, the executives, as lobbyist, took it straight on the chin. Why? tomorrows just another day... interest....fees....revolving. I don't think the investment industry is going to take it on the chin. If you haven't realized, they answer to no one. We all answer to them.

Joseph Lutz
Easton, PA

Dear FRONTLINE,

I was one of those people who fell into the credit card trap hard. I ended up filing Chapter- to get out of it. My major source of pain (among several cards I had) was a Srs Card that I had gotten in the early 80's. They for reasons unkown suddenly switched fron the fixed interest rate I had enjoyed for many years, to a variable rate that at the time ended up being 20%, even though I had never been late on a payment. I very much enjoyed this show. I hope it opens a lot of peoples eyes to the practices of the credit card companies and the banks that control them. It is also my hope that more people realize what is going on before they end up like I did.

Bankruptcy was not a pleasent experience, but I had my debt paid in three years, not 35-40 like I was headed for. It is amazing who fast you can pay off your debts with no interest. Yes I know my filing will be on my records for 7-10 years, but I am much better off not having to worry how I am going to make the next payment on a never-ending credit card bill. I agree with one of your other posted comments that you should do a show on the collection agencies. They have also been a source of grief for numerous consumers.

W K
Dayton, Ohio

Dear FRONTLINE,

The office of Home Land Security should be looking at the credit card industry. The debt that is so rapidly growing in this nation will destroy our country faster than any terrorist organization.

Leland Olson
Arlington, SD

Dear FRONTLINE,

I didn't hear a mention of the fact that credit card merchant service companies charge vendors a percentage off the top of the sale from 2 to 4% (including sales tax. Off the top of the 10% of the average vendor's profit. It sucks. Customers pressure vendors to accept credit cards so they receive rewards. I own a small business. I refuse to accept credit cards because I am an independent and stubborn individual who finds credit cards really creepy. I urge all small vendors to refuse to accept credit cards. Your report only suggests that credit cards bring out the greed in the consumer. Not only do American consumers want to have more unnecessary stuff than they can afford, they want the rewards like flyer miles. Credit card companies take advantage of consumer greed. Your report make consumers out as victims. Americans are selfish, shallow, foolish, greedy, wasteful, ignorant. Consumers should be accountable for their folly.

Eureka, CA

Dear FRONTLINE,

Thank you very much for your program. It motivated me to discover that my annual rate has increased to almost 30%. I will add to viewers' thoughtful comments that there seem to have always been two types of sales/consumer relationships: one in which sales believes 'there is a sucker born every day' and one in which sales does all it can to form honorable relationships with its customers. Twisted language seems always to have been used as a distraction.

I appreciate your efforts to enlighten us. In a world where we no longer see each other face to face, it is so easy to abuse people but no less shameful.

M A
Brooklyn, NY

Dear FRONTLINE,

Thank you for the great program. It makes me want to get rid of all my cards, but that would not be economically funtional. I experienced the interest rate change from 3 different credit card companies. I contacted them within 30 days and canceled the card and demanded that they honor the original terms that I had agreed to in the contract. On all three occasions, the companies complied with my request.

Congress should pass a consumer protection law granting consumers an opportunity to "freeze" the interest rate within 30-60 days after a rate change. Thereby honoring the original rate the consumer agreed to on the contract.Of course the law would not apply to any variable rate contracts, only companies offering "fixed" rates.

Cliff Courtney
Phoenix, Arizona

Dear FRONTLINE,

Again, Frontline has done a great job of investigative reporting.Unfortunately the people who need to see it probably didn'twatch because it isn't entainment.

I have found that the only recourse is to buy stocks of thecompanies in which I have credit cards and hopefully the interestand appreciation in price will offset some of the fees. Buththis is the difficult and inefficient way to do it. If we wereindependently wealthy, we wouldn't need credit. Most peoplecan't pay cash for a home, a car or education without incurringsome debt. This is the nature of our society.

Carroll Bostic
Charlotte, North Carolina

Dear FRONTLINE,

We loved your coverage on how Credit Card Companies are charging out landish fees and interest rates. While one may argue consumer responsibility is critical in controlling how much Americans charge, the fact of the matter is in talking to several people, I did not talk to one person who has not been stung by a Credit Card Company.

My wife and I are both professionals and have a household income in the upper 5% of wage earners, and have been stung through the practice of how payments are posted. We have three credit cards, and because we made one late payment (even though I called and informed them of my over sight) our rates jumped from 18.0 to 29.9%. Not to mention, I still got dinged for $39.00 late fee. The goofy thing was, I was late one day. The payment was due on a Sunday, and I paid it on a Monday. I began doubling my monthly payment to quickly pay this balance off. Chase Bank is the worst, only to be followed by Discover. One final thought, you should do a piece on surcharges on land line telephone and cell phone companies. Neither can explain these fees either.

Clarence Estes
Brownsburg, Indiana

Dear FRONTLINE,

the real problem is that our gov't, our congress (remember "by the people, for the people, etc.?) doesn't stop the credit card companies from charging consumers whatever they want to charge us. A real shame! The OCC needs to work for the comsumer vs. the credit card industry lobbyists....

Gary Hopkins
johnson city, TX

Dear FRONTLINE,

I was very happy to see somebody finally document what many consumers like myself has experienced. We have two credit cards with Chase Bank (due to a Chase merger with Bank One and First National Bank). Recently we were charged a late fee when we paid our payment at a local Chase branch. When I called Chase, the representative told me my payment was late. She went on to explain the branches and the credit card divisions are separate. She told me when payments are made at a branch office, it takes four to five business days for the payment to be posted. Her best statement was to make the payment four to five days early, and we would not be charged late payments. Since that time, both of our Chase cards interest rates increased from 19.9 to 29.9 APR. We are not any where near our limits. I told the representative this is criminal. I hope our Senators and Congressional representatives pass a law to prohibit this practice. It is nothing short of robbery from consumers who work hard to pay their bills on time.

Brownsburg, Indiana

Dear FRONTLINE,

I work in the banking industry as a risk analyst. Unfortunately, a major issue that was passed over in this program was the loss incurred by financial institutions due to the inability of the customer to fulfill his or her end of the agreement, but we don't like to present that side of life.

Living within my means is a personal commitment, I find it unfair that my neighbor should receive a benefit for actions otherwise.

Rates charged on credit reflect the risk taken on by lending to an individual sight unseen. Perhaps we could collectively spread those losses among all active borrowers and bring rates down for everybody.

We live in a society of instant gratification, and the burden of responsibility must lie in the individual. To Frontline, I will be leary of the unbiasedness in your views forever more.

Jim K
Seattle, WA

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posted nov. 23, 2004

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