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Socking-it to Overburdened Credit Card Carriers Pays Big Returns

 

 

The Wall Street Journal and The New York Times announced that J.P. Morgan Chase along with Goldman Sachs and Citigroup now "stand astride post-bailout Wall Street, having benefited from billions of dollars in taxpayer support and cheap government financing to climb over banks that continue to struggle. They are capitalizing on the turmoil in financial markets and their rivals’ weakness to pull in billions in trading profits."

 

Along with massive government tax dollar bail-outs, Chase recently purchased WaMu and has revamped its total credit card financial terms to work in its favor.  Chase and WaMu customers have stood passively by in horror as their APR's increased anywhere from 10 to 20 percent.  Several long-time customers have complained of APR increases from a previous 12.99 percent anywhere up to a massive 39.99 percent APR, causing one credit card client to exclaim that there was "little difference from borrowing credit from Chase or illegally getting credit from off-the-street loan sharks."

 

In addition, Chase added to the stress on credit card customers by increasing its fees and penalties, while also considering charging an annual fee before the new financing laws approved by Congress go into effect in 2010.

 

Current laws allow credit companies like Chase to change terms virtually without any oversight or regulation.  Consequently, many card holders are "opting-out" from the additional overload of higher APR's, fees and penalties by notifying the company in writing.  Chase then agrees to abide by the customer's previous terms, but then closes the account.  The customer then must pay the account monthly under the old terms until the balance is completely paid-off.

 

Unlike companies e.g., who have offered to settle an account balance by accepting a payoff reduced by 30 percent of the total balance, Chase instead determined to make the above increases to its accounts, causing panic and additional stress to its cardholders.

 

The Times credits "JPMorgan’s renewed strength, like Goldman’s, comes as it vaults ahead of longtime rivals, especially in investment banking, including bond and equity trading, and underwriting debt to help companies issue shares and bonds. Traders took advantage of big market swings and less competition to post big gains in fixed-income and equities."

 

Nowhere is the credit card terms "revolution" mentioned as a catalyst for Chase's overall financial improvement, but credit card holders "feel the power".  Many have had to let Chase pass their accounts to Collections with no intent to pay-off their debt.  Apparently, Chase recognized that when it determined to change its terms agreements and allowed for the charging-off of many customer accounts, feeling that the increases are justified in countering the prospective charge-offs.

 

While J.P. Morgan Chase has positioned itself to become and maintain itself as a market leader, its credit card strategy has distanced itself from many of its long-term clients.  The company has made its decision based on profitability without any sensitivity of increasing and overburdening the financial plight of its customers.  Unfortunately, other financial corporations will hold up Chase to the light as the mold for emulation, thus directing the market strategy for the next several decades.  Credit card holders better hold on tight.  It's going to be a bumpy ride.