Chase Increases Balance Transfer Fee to 5%
July 16th, 2009 by Kenneth Long
Chase has increased fees on balance transfers and cash advances to 5% of the amount, with a minimum fee of $10. This means a balance transfer of $5,000 would incur a $250 balance transfer fee. This substantial increase as well as the announced higher minimum payments on existing promotional balances may be a sign that Chase is discouraging such transactions for a while.
Up until just a few years ago, balance transfers normally incurred a 3% fee that was capped at $50. Now there is no cap, and the fee has increased to 5%.
Cash advances did not have such a fee until now. This up-front fee is also 5% of the cash advance, with a minimum fee of $10. In addition, there is still no grace period on cash advances, meaning that the higher interest rate for cash advances will begin accruing on that balance immediately. Additionally, Chase has quietly lowered cash advance limits on cards, with many reduced to the lower of 10% of the credit limit or $1,000.
For several years from 2003-2007, Chase actively encouraged its superprime customers to rack up large debts through very attractive balance transfer offers. While most were around 3.99% or 4.99%, some were as low as 1.99%.
The idea was that they would float these low interest balances for a few months until the cardholder did something to prompt a higher rate. They were hoping that enough cardholders would miss a payment so that they convert a certain percentage of these accounts into high-profit producers. A cardholder that missed a payment would see their interest rates hiked and would lose the “life of the balance” rates for good.
While these changes have affected a small number of account holders, a very high percentage of account holders never triggered interest rate increases. They were very careful to make their monthly payment so that they could retain the low rate. If they were ever unable to meet all of their monthly obligations, they would choose some other payment to delay. The Chase accounts would always be paid on-time.
Out of Balance Transfer Game
By making such moves to raise balance transfer and cash advance fees, Chase is betting that they will make enough money on upfront fees to offset any higher default risks. While some customers never read the fine print on an offer, most of their superprime customers do. That is why they have such good credit in the first place. These customers will likely balk at any new balance transfer offers that Chase presents to them.
The extraordinarily low rates that Chase offered previously will likely never be offered again given the regulatory climate that credit cards must operate in beginning in February 2010. By reducing the “any time any reason” potential for changing the terms on a credit card agreement, credit card issuers must pass on some of the lost profits to their best cardholders if they are to retain current profit margins.
There was a whole culture of consumers that took advantage of the low rates previously offered. Many of them used the offers to buy cars at below-market interest rates. Some were even as bold as to use these low interest offers as a sort of margin account in order to place investments that were expected to earn a higher rate than they were being charged by Chase.
While Chase encouraged such activity before, they certainly have put the brakes on this marketing strategy. In fact, the higher minimum payment requirements that they have placed on many of their account holders was expanded to an even larger percentage of their credit card portfolio.
Certainly Chase understands the negative public perception that accompanies such changes. However, they are also aware that those who are both writing and reading such infuriating comments are largely those that have already been affected by the changes. In short, the negative press has been fairly minimal given the sudden and shocking minimum payment hikes that have affected so many.
Regardless of public opinion, it certainly hasn’t hurt Chase profits. Chase reported quarterly results of $2.7 billion while CNN reported that most analysts projected a profit of $280 million. That announcement prompted the following quote from CNN:
JPMorgan Chase once again proved that it has been one of the better-run banks during the financial crisis after reporting quarterly results that blew past Wall Street estimates.
If there is good news for the consumer, it is that banks may be almost out of the woods in terms of consumer credit losses. Perhaps that will translate into better terms for cardholders that what the current economic climate has produced. Even if this occurs, it will not happen before February 2010 as provisions of the CARD Act are enacted.
This entry was posted on Thursday, July 16th, 2009 at 8:40 am and is filed under Credit Cards, Credit Cards: Chase. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
July 16th, 2009 at 6:37 pm
The credit losses have not even began yet….When millions of cardholders are unable to meet the new minimum payments and doubled interest rate hikes, what was superprime cardholders, that worked all there lives to for a perfect credit score and pride in paying all of the obligations on time, will give up….Why, because they are now being PUNISHED for all of they’re efforts and in a blink they’re credit is ruined by those they trusted…..NO they are not out of the woods, they are at the entrance, lets see what those profit returns look like down the road….
July 16th, 2009 at 7:55 pm
“If there is good news for the consumer, it is that banks may be almost out of the woods in terms of consumer credit losses.”
The loses have not begun. Chase’s upturn in the short term was expected..its the long term that counts. Chase, by its actions, has angered over a million of its best customers. This will translate into future loss of business from millions of individuals, friends, families, etc. across all of Chase’s lines. Not to mention the WAMU 1,000,000 cardholders whose cards got cancelled in the past few months, and all the Heloc lines that got reduced. That’s the internal causes, now you have the external.
Chase’s 5% payment increase, its fees, its unscrupulous behaviour, will cause alot of cardholders to default. The economy and unemployment will effect the rest. Not to mention the housing market, which is still dropping. That will put a dent in WAMU’s pockets, especially when Chase forecloses and is stuck with thousands of homes. There will be no bailout, and no “loyal” customers to turn to.
July 16th, 2009 at 8:39 pm
Chase had a profitable quarter despite heavy losses in its credit card dept. Those losses were NOT caused by people holding the low rate balances, of course, but by people filing bankruptcy or otherwise not paying their credit card bills due to the crummy economy. However, Chase is taking advantage of their best customers’ willingness to pay obligations by establishing a special increase in their minimum payment, Just For Them.
It’s hard to read about Chase planning on increasing its employees’ pay by balancing their heavy CC losses on the backs of already financially strapped customers. They truly do not care about the economy, the increasing numbers of people going bankrupt, or their own role in creating new bankruptcies due to this new payment requirement. What may be most damning of all, they have no sense of remorse or regret in their choice to continue playing the role of evil, completely amoral corporate citizen. I wonder what kind of economic collapse it will take, to make an outfit like Chase realize they are not invincible, and their dirty tricks playbook is not going to benefit them, ultimately.
July 16th, 2009 at 8:58 pm
I got the letter that said any balance transfer fees would be subject to a 5% fee. I now have 3 chase cards, since my wamu card was turned over to chase. I think wamu was way worse than chase, they raised my rate to 29.99% for no good reason, so I paid that card off about 2 years ago, and haven’t used it since. But anyway, I have a balance transfer available on my one chase card, and the other card just got bumped up to 5% minimum payment per month. I doubt I would never have transferred any balance for a 5% fee. Thats a pretty big fee. Oh well, as soon as I pay off all my chase cards I’m gonna close them out maybe one every 6 months so I won’t take a big hit on my credit score all at once. I will still have about $8000 available credit, should be more than enough to keep a good score.
July 16th, 2009 at 9:11 pm
A quote from the The Market Oracle:
“Talk about making a silk purse out of a sow’s ear. This is an obscene abuse of the accounting system – whether it’s legal or not. No wonder nobody ever went broke using accrual accounting. These guys need to be forced to recognize the money they have actually earned – not the amount they can account for using clever financial trickery.”
July 17th, 2009 at 5:20 am
The author may be giving Chase Bank too much credit. It is statistically conceivable that Chase Bank has made money off of their low interest rate offers. If just one percent of these customers are late every month, and another 2 or 3 percent mistakenly run up more debt at the higher interest rate every month, then within a couple of years time, as many as 25% to 50% of those who got these offers may have muffed the offer and are paying higher interest rates on a portion or more of these accounts.
The problem is Chase Bank is not disclosing this aspect of the puzzle. Instead, Chase Bank is baiting and switching their remaining low interest rate loan customers who kept their loan pure without ever revealing the millions of others who did not.
Consumer credit card debt can best be paid off fastest by paying off higher interest rate debt faster than lower interest rate debt. No matter what Jamie Dimon of Chase Bank says publicly, he is wrong when he says he is helping his clients pay off their debts.
The low interest loans should be paid off SLOWER than higher interest rate loans, Chase Bank’s actions fly in the face of the truth.
ALL CREDIT COMPANIES made these low interest rate offers,so far Chase Bank is the only one to renege on the deal. Plus, Chase bank is not offering OPT OUT. If Chase Bank succeeds with their next wave of low interest credit card takeaways, other credit companies may follow.
http://www.daily-protest.com
http://www.bloggersagainstchasebank.com
July 17th, 2009 at 10:04 am
I am simply opting-out. I’m not paying anything any more. If they do not care about me after years of paying on time. I will give them what they want…apparently nothing. I will use their accounting rules and just write it off. I can wait it out (3yrs), so what having excellent credit doesn’t mean anything any more…look where it’s got me. Who’s with me!!??
July 17th, 2009 at 10:44 am
Tim, what are the specific parameters in opting-out when Chase has not provided an opt-out option? What is this 3 years of which you speak?
July 17th, 2009 at 3:29 pm
Did anyone receive a letter regarding a change in their due dates, either a later or earlier due date? I received one notifying me of 5 extra days to pay.
July 17th, 2009 at 6:32 pm
What specifically can one do to opt out when Chase says there is no opt-out option? What are these 3 years Tim refers to?
July 17th, 2009 at 7:32 pm
George,
I think Tim means he is just going to quit paying and it will take about 3 years for them to try and collect….That’s only my opinion. I have read several blogs about cardholders that are just going to GIVE-UP…..
July 23rd, 2009 at 5:59 pm
Put me on the list of people who plan to stiff Chase. They’ve raised my payment from $300/month (which I can pay easily) to $750/month (which I can’t possibly pay). I don’t have any assets they can seize so it won’t do them much good to sue me. I figure if I just stop paying them for six months, they’ll get the message and settle for half of what I actually owe them. My credit rating will be awful but so what, after a few years the dings drop off.
Why doesn’t Chase understand that most of us don’t actually HAVE to pay them, we just pay them because we believe it’s the right thing to do? I don’t believe that any more and I won’t pay.
July 24th, 2009 at 4:52 pm
[...] Long wrote Chase Increases Balance Transfer Fee… For several years from 2003-2007, Chase actively encouraged its superprime customers to rack [...]
August 14th, 2009 at 8:34 pm
Ditto Margaret! I am taking a stand and refusing to be screwed by Chase ever again. I have 3 cards with them. Never been late, pay more than minimum, etc….. Raising my minimums from 2 to 5% is INSANE! I, like you, have NO assets and barely get by, like most everyone else. I truly hope EVERYONE defaults on these bastards. They are nothing but loan sharks, making demands on customers that SHOULD be illegal. You have a soul mate, I will “stiff” Chase as well.
September 2nd, 2009 at 12:38 pm
I agree with everyone else that I have read. I too have been screwed by Chase. My payment went from $240 to $600. I don’t know how to opt out. I don’t know how to pay it, and I don’t know how to get them back! I do know I am very stressed and do not know what I am going to do. I have never been late nor missed a payment and totally believe that Chase Bank is making a huge dis service to it’s used to be customers. I will somehow get through this but never again will I let this happen.If there is a way for all of us to get out of these outragous increases please let me know. I have not called one of the 800 numbers I have read about to get this reduced, but if I do and it works I will post it. I hope the Bank goes completely belly up even though you and I are the owners d/t out bailing it out without an opinion or a vote.