Monday, January 6, 2014
Posted in
Products
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RBS Citizens Bank* is one of those banks that
makes as much money as it can from fees -- and if you think that they'll
be nice and refund the fees, you'd be mistaken. Here is my story:
I was a customer of theirs for more than six years, and in that time I had one small overdraft, but otherwise my record was perfect. (As banks often do, they refunded the fee for that overdraft because it was my first.) But in late 2013 they came out with a new 'get-tough' policy. Part of this get-tough policy was that they would refund fewer fees, and part was that they would clear checks in the order of largest to smallest. Clearing checks in the order of largest to smallest enables them to maximize the number of fees if there is an overdraft -- and that's just what happened to me.
Let me give you an example of how it affects the customer for the bank to reorder a day's withdrawals:
Let's say that you have a balance of $80, and four checks come in to clear that are $5, $10, $25 and $60. If the checks come in smallest to largest, this is what happens:
$5 check clears, new balance: $75 (no fee)
$10 check clears, new balance: $65 (no fee)
$25 check clears, new balance: $40 (no fee)
$60 check clears, new balance: (-$20) ($39 fee)
($39 is the size of the overdraft fee that Citizens Bank levies.)
If the checks come in largest to smallest, this is what happens:
$60 check clears, new balance: $20 (no fee)
$25 check clears, new balance: (-$5) ($39 fee)
$10 check clears, new balance: (-$15) ($39 fee)
$5 check clears, new balance: (-$20) ($39 fee)
In other words, if the checks are posted largest to smallest, you pay three fees instead of one. And Citizens Bank will post them largest to smallest even if they don't actually come in that way.
My Experience
Two days before Christmas 2013, an unexpected charge came into my PayPal account, and that resulted in PayPal pulling $85 from my Citizens account. I noticed the problem that evening, and the next day I went to the bank at 2:30 p.m. to make a deposit, only to find that the branch had closed early for Christmas Eve. For all my life, I have never known a bank to close before 3:00 p.m. on a business day, even before a holiday, so I wasn't expecting the bank to be closed. Needless to say, I wasn't able to make the deposit. I called the bank's toll-free number, and they said there was nothing I could do. They didn't tell me that the Citizens branches inside Stop & Shop supermarkets would be open until 5:00 p.m.; if they had told me that, I would have gone to a Stop & Shop.
That evening my rent check came in and overdrew the account by $36. Even though the largest check of the day came in last (the rent check), the bank re-ordered them so that three small withdrawals appeared to come in last, and they charged me a $39 fee for each one, for a total of $117.
Given that I had been a good customer for six years and that I was prevented from making a deposit on Christmas Eve, I assumed that they would refund the fees. But that's not what happened. The bank manager -- a disagreeable woman who seemed to take delight in saying "no" to me -- agreed to refund only one of them, meaning that I would have to pay $78 for an overdraft of $36. Yet if the checks had been processed in the order that they came in, I would have been charged only one fee. Given that the overdraft occurred because the bank closed early, I wouldn't have liked paying even one fee, but I would have accepted it. But to be told that I had to pay two fees because of the trickery of reordering the deposits threw me into a rage. I told the manager that I would close my account, and she said that was fine. I then said that I wanted to speak to someone over her head, like a vice-president, and she smugly told me that she was a vice-president (with a smirk on her face). I then stood up and started yelling. I told her that she would regret it, and I stormed out of the bank. I was so angry that I slammed the front door three times and broke it.
Breaking the front door wasn't intentional, but I wasn't sorry. Nor was I sorry for losing my temper.
Some people may wonder why I got so bent out of shape over some fees, but as far as I was concerned, I was being robbed. I'm retired and don't have a great deal of money, and $78 in fees was something I couldn't afford. Besides, thievery is thievery, even when the thievery is cloaked as institutional fees. Too many people in our society have become inured to being treated unfairly by institutions. I guarantee that if more people reacted the way that I did, unreasonable fees would become a thing of the past.
Years ago there was a court case that may apply to this situation. Someone left a large sum of money in a bank and didn't return for many years. During that time, the bank moved the money around from one account to another, charging the depositor a fee for each move. When the depositor returned, the money was almost gone. The depositor took the bank to court, and the court ruled that the bank had illegally stolen the money. If a court ever rules that Citizens Bank is using dishonest methods to take money from its depositors, they will have to pay back millions of dollars.
The fact is, if checks actually come in to clear in the order smallest to largest, the bank has no legitimate reason for reversing the order. The only reason they could possibly have is to levy more fees, which is a wholly illegitimate reason. A bank practice which has no purpose but to take money from its customers is a practice which may indeed be illegal.
The behavior of Citizens Bank would at first seem to be incredibly stupid. It isn't sensible to alienate customers by charging them unreasonable fees. But the fact is, most customers put up with it. In the same way that people think they can't fight city hall, they imagine that banks are too powerful to oppose; so they accept the fees, and they resolve to be more careful in the future. But my situation shows that even a very careful person can make mistakes. I check my balance almost every day, and if I see a problem, I run to the bank to make a deposit (if they'll allow me!). Even so, I still manage to get overdrawn on occasion. The point is, mistakes happen -- and when mistakes happen, the bank makes a profit.
Banks don't actually want all of their customers to be so careful. That's because they make most of their money from the careless customers, the ones who rack up large numbers of fees. Even so, if a bank has all bad customers, that isn't good either. Having all bad customers would decrease the bank's overall deposits. With a base of nothing but bad customers, the bank's business would be less stable and secure.
That's why I'm surprised that I was treated so badly. As a customer who rarely has an overdraft and who always keeps a positive balance (even if it is often low), I help to provide working capital to the bank, and also stability. When a bank treats a customer like me badly, they are hoping that I won't go to the trouble of changing banks. That's probably true for most customers. But there will be that 5% or 10% that becomes so incensed that they leave.
In the end, what amazed me most was the attitude of the bank manager. She clearly thought that in following the bank's dishonest and confiscatory rules, she was in the right. She didn't recognize that the bank was commiting a kind of thievery, and that she -- as the bank's agent -- was facilitating the thievery. She clearly felt that the big fines levied against me were justified, despite knowing that I tried to prevent the overdraft the day before Christmas. I almost feel sorry for her; I couldn't imagine having such skewed values.
How It Ended
Having threatened to make the bank manager "regret" what she was doing, I had to do something. My impulse was to run back and shoot her full of holes, but spending the rest of my life in jail wasn't an option. And then I realized that my natural talent -- writing -- was the way to get revenge. I wrote her a letter (which I slipped through the door) in which I promised to wage a publicity campaign against the bank. I told her that I would do all of these things:
* Post a negative review on Yelp (which I did that evening and included a copy with the letter);
* Post negative reviews in other venues on the internet, such as in online phone books (imagine how much business the bank might lose if every time a person looked up their phone number they found a negative review);
* Write a negative article about the bank on my blog (this article);
* Write letters to local newspapers;
* Write to the bank president;
* File a complaint with the U.S. Consumer Financial Protection Bureau (which has regulatory power over banks); and
* Complain to my congressmen about unfair banking practices.
I also made it clear that as long as I had an active account at the bank, I would feel free to conduct business in her branch. (The police had ordered me to stay away, but they had no authority to do so, or power to enforce such an order.) Without intending to, I had apparently spooked the woman, because that evening I checked my balance on the internet and most of the fees had been refunded.
I then wrote another letter telling her that one more check was coming in, and that I wouldn't consider our dispute to be settled if that check bounced and caused me additional fees. Well, that check came in and was cleared. In the final analysis, I paid $13.34 in fees. It's not much, but I'm still not happy about it.
Not everyone has a razor-sharp pen like I do (or a temper like I do), and most people will not want to wage the campaign that I was ready to wage. I do, however, encourage people to leave banks that treat them badly (Citizens Bank in particular!), but they also must be careful to keep track of their bank balances.
My new bank is smaller, and they clear checks from smallest to largest. Their fees are also lower. I have the same online access to my account that I had at Citizens, and I also have the bill-pay feature -- and all of it is free. Since I overdraw my account only once every three years, my overall expenditure on the account will be low. Their network of cash machines is smaller, but I rarely use cash any more.
I found out before my Citizens account closed that if you have a negative balance, they charge a negative balance fee of $6.99 every three days, which my new bank does not. Also, my new bank doesn't charge any fees to link accounts, so my savings account can be used as a backup for my checking account (Citizens charges a $30 yearly fee). As I write this, I've been using the new account for a couple months. The new bank's web site is easier to use than Citizens'. The bill pay feature, especially, is easier to set up than Citizens'. Furthermore, my new bank sends me a monthly statement via snail-mail which they don't charge me for (Citizens charges $2 per month).
The Damage
The damage that this incident did was mostly psychological. First, it ruined Christmas Day for me. Knowing how mercenary banks have become, I started to worry about how much I was going to be charged the moment that I learned I couldn't make the deposit. I said above that I assumed that they would refund the fees, and for the most part I did, but there was still that nagging worry that they would be unreasonable.
But the psychological damage goes beyond Christmas. When the institutions that you rely on are trying to take advantage of you, to steal from you, it makes you feel like the world is against you. The fact is, I had read about their new check-clearing policy just a couple weeks before, and I was disgusted, so the negative feelings about the bank had already begun. I had already made a decision to move to a new bank, but just hadn't gotten around to it.
More bad bank experiences
I think this article is going to become my "bad bank" article. I've had a few more unpleasant experiences that I'm going to post here.
New York Bank
This experience happened thirty years ago at least, about five or ten years after cash machines came on the scene.
I had an account with New York Bank on Fifth Avenue. I don't precisely remember the chain of events, but I was in the foyer of the bank at the cash machine. I must have looked puzzled because a man who was coming into the bank asked me if I needed help. I was depositing a paycheck into the cash machine. My balance was very low, and I needed money. The man informed me that I could immediately withdraw money against any check that I deposited, and he made it sound as if this was a wonderful service provided by the bank. I asked him if he was sure, and he said that he was sure because he was the bank manager! So I deposited the check, and then made the withdrawal.
When my bank statement arrived later (this was before the internet or online banking), I discovered that I had been charged a $7 fee! Now, $7 may not sound like much, but it was the equivalent of $20 or $25 in today's money. In fact, that was the standard amount that banks charged for overdrafts in those days. So I returned to the bank to express my displeasure. The bank manager wasn't in at the time, and the subordinate who talked to me adamantly refused to refund the fee -- even though it was the bank manager who encouraged me to make the withdrawal (and who had not informed me that I'd be charged an overdraft fee if I did). I didn't yell that day, but I walked out of the bank in a state of amazement that they could be so unfair.
I decided not to bother arguing with them any more. I proceeded to spend my balance down to zero, then I deposited a bad check from an old account, and I withdrew $10 to compensate myself for the fee and for my displeasure.
HSBC
This happened either in the late 1990's or early 2000's, the time when credit-card banks started to find new ways to increase their customers' interest rates. Today, if you develop bad credit with another company, your credit-card bank will use that as an excuse to raise your interest rate (even if your record with them is good). If your credit record shows that you are over-extended with debt or credit, your credit-card bank will use that as an excuse to raise your interest rate (even if your record with them is good). If you have one or two late payments, they will use that as an excuse to increase your interest rate.
It was sometime around 2000 that HSBC told me that they were going to increase my interest rate from 16% to 21%. I asked them why, and the reason they gave was that I had been one day late with two payments one year before! (that was in the days when credit-card companies gave their customers a grace period during which they wouldn't incur a fee). In truth, I think they probably increased my interest rate because I became over-extended with debt. I had become over-extended because I had lost my full-time job and was doing temporary work, and therefore was depending more on credit than I had before. I was, as you would expect, incensed that they would raise my interest rate for such a flimsy reason. I had worked very hard to have good credit, and for them to treat me as a bad credit risk because two checks had arrived during the grace period was ridiculous to me.
I called them up and let them know how I felt. I insisted that they reduce my interest rate back to 16%, and their response was, "We can't do that." I told them that I would not pay another bill until my interest rate was returned to 16%. Well, they didn't fall for my bluff. The thing is, it wasn't a bluff. I never paid them another cent.
Using flimsy pretexts to increase customers' interest rates strikes me as yet another stupid practice of the banks. If a person is over-extended with debt, it usually means that the person's income has dropped. To increase such a person's interest rate (or, as some banks do, to increase the minimum payment) just makes it all the harder for the customer to pay his bills. That encourages people to default. Banks keep shooting themselves in the foot, and I don't know why.
Another way they shoot themselves in the foot is by loading fees onto the accounts of people who are having financial problems. That backfires in two ways. First, it increases the burden of debt on the customer at a time when the customer can't afford it. Second, once the customer sees how much the debt has ballooned from the added fees, he may start to feel cheated and taken advantage of -- and that encourages people to default.
Capital One
After closing a credit-card account with Capital One, I was issued a new card that I didn't ask for. Even though I wasn't happy with Capital One, I decided to put the new card in my wallet in case of an emergency. Well, one day I whipped out the card by accident and charged $135 on it (I meant to use a different card). Even though the card had only a $100 credit line on it, the charge went through. By the time I realized my mistake, Capital One had levied two fees on the account totalling $78. So before I could even make my first payment, I felt that I was being ripped off. Capital One wouldn't remove the fees. That meant that if I paid off the $135, I would still owe them $78 that I felt they didn't deserve. If they had removed the fees, I would have paid off the balance immediately and closed the account. As it was, I never paid anything because I knew they'd dun me for the fees forever.
Now, you may say that it was my mistake because I used the card, but I don't see it that way. First, I never asked for the card. Second, they didn't decline the charge, which they should have. Third, the $78 in fees were unreasonably high. Also, knowing that I used the car by mistake should have swayed them to some extent. As I said above, I never paid anything, and a few years later the account had ballooned to over $900 (from accumulated fees), which just made me laugh. I eventually settled my other Capital One account for $400 more than the principal, so I felt that they got enough money to cover this account too.
All these things that I've mentioned here provide a good argument for strong governmental regulations. Banks don't actually know what is best for them. Left up to their own devices, they bully and alienate their customers.
(We did eventually get that strong government regulation in the form of the Consumer Financial Protection Bureau. But as I speak, Donald Trump's appointee to head the bureau is doing everything he can to make it ineffective. All the poor people who voted for Trump didn't anticipate that he might screw them.)
_______________________
* "RBS" stands for Royal Bank of Scotland, of which Citizens Bank is a subsidiary. There are many banks named "Citizens" across the nation; the bank I am speaking of has its headquarters in Rhode Island.
I was a customer of theirs for more than six years, and in that time I had one small overdraft, but otherwise my record was perfect. (As banks often do, they refunded the fee for that overdraft because it was my first.) But in late 2013 they came out with a new 'get-tough' policy. Part of this get-tough policy was that they would refund fewer fees, and part was that they would clear checks in the order of largest to smallest. Clearing checks in the order of largest to smallest enables them to maximize the number of fees if there is an overdraft -- and that's just what happened to me.
Let me give you an example of how it affects the customer for the bank to reorder a day's withdrawals:
Let's say that you have a balance of $80, and four checks come in to clear that are $5, $10, $25 and $60. If the checks come in smallest to largest, this is what happens:
$5 check clears, new balance: $75 (no fee)
$10 check clears, new balance: $65 (no fee)
$25 check clears, new balance: $40 (no fee)
$60 check clears, new balance: (-$20) ($39 fee)
($39 is the size of the overdraft fee that Citizens Bank levies.)
If the checks come in largest to smallest, this is what happens:
$60 check clears, new balance: $20 (no fee)
$25 check clears, new balance: (-$5) ($39 fee)
$10 check clears, new balance: (-$15) ($39 fee)
$5 check clears, new balance: (-$20) ($39 fee)
In other words, if the checks are posted largest to smallest, you pay three fees instead of one. And Citizens Bank will post them largest to smallest even if they don't actually come in that way.
My Experience
Two days before Christmas 2013, an unexpected charge came into my PayPal account, and that resulted in PayPal pulling $85 from my Citizens account. I noticed the problem that evening, and the next day I went to the bank at 2:30 p.m. to make a deposit, only to find that the branch had closed early for Christmas Eve. For all my life, I have never known a bank to close before 3:00 p.m. on a business day, even before a holiday, so I wasn't expecting the bank to be closed. Needless to say, I wasn't able to make the deposit. I called the bank's toll-free number, and they said there was nothing I could do. They didn't tell me that the Citizens branches inside Stop & Shop supermarkets would be open until 5:00 p.m.; if they had told me that, I would have gone to a Stop & Shop.
That evening my rent check came in and overdrew the account by $36. Even though the largest check of the day came in last (the rent check), the bank re-ordered them so that three small withdrawals appeared to come in last, and they charged me a $39 fee for each one, for a total of $117.
Given that I had been a good customer for six years and that I was prevented from making a deposit on Christmas Eve, I assumed that they would refund the fees. But that's not what happened. The bank manager -- a disagreeable woman who seemed to take delight in saying "no" to me -- agreed to refund only one of them, meaning that I would have to pay $78 for an overdraft of $36. Yet if the checks had been processed in the order that they came in, I would have been charged only one fee. Given that the overdraft occurred because the bank closed early, I wouldn't have liked paying even one fee, but I would have accepted it. But to be told that I had to pay two fees because of the trickery of reordering the deposits threw me into a rage. I told the manager that I would close my account, and she said that was fine. I then said that I wanted to speak to someone over her head, like a vice-president, and she smugly told me that she was a vice-president (with a smirk on her face). I then stood up and started yelling. I told her that she would regret it, and I stormed out of the bank. I was so angry that I slammed the front door three times and broke it.
Breaking the front door wasn't intentional, but I wasn't sorry. Nor was I sorry for losing my temper.
Some people may wonder why I got so bent out of shape over some fees, but as far as I was concerned, I was being robbed. I'm retired and don't have a great deal of money, and $78 in fees was something I couldn't afford. Besides, thievery is thievery, even when the thievery is cloaked as institutional fees. Too many people in our society have become inured to being treated unfairly by institutions. I guarantee that if more people reacted the way that I did, unreasonable fees would become a thing of the past.
Years ago there was a court case that may apply to this situation. Someone left a large sum of money in a bank and didn't return for many years. During that time, the bank moved the money around from one account to another, charging the depositor a fee for each move. When the depositor returned, the money was almost gone. The depositor took the bank to court, and the court ruled that the bank had illegally stolen the money. If a court ever rules that Citizens Bank is using dishonest methods to take money from its depositors, they will have to pay back millions of dollars.
The fact is, if checks actually come in to clear in the order smallest to largest, the bank has no legitimate reason for reversing the order. The only reason they could possibly have is to levy more fees, which is a wholly illegitimate reason. A bank practice which has no purpose but to take money from its customers is a practice which may indeed be illegal.
The behavior of Citizens Bank would at first seem to be incredibly stupid. It isn't sensible to alienate customers by charging them unreasonable fees. But the fact is, most customers put up with it. In the same way that people think they can't fight city hall, they imagine that banks are too powerful to oppose; so they accept the fees, and they resolve to be more careful in the future. But my situation shows that even a very careful person can make mistakes. I check my balance almost every day, and if I see a problem, I run to the bank to make a deposit (if they'll allow me!). Even so, I still manage to get overdrawn on occasion. The point is, mistakes happen -- and when mistakes happen, the bank makes a profit.
Banks don't actually want all of their customers to be so careful. That's because they make most of their money from the careless customers, the ones who rack up large numbers of fees. Even so, if a bank has all bad customers, that isn't good either. Having all bad customers would decrease the bank's overall deposits. With a base of nothing but bad customers, the bank's business would be less stable and secure.
That's why I'm surprised that I was treated so badly. As a customer who rarely has an overdraft and who always keeps a positive balance (even if it is often low), I help to provide working capital to the bank, and also stability. When a bank treats a customer like me badly, they are hoping that I won't go to the trouble of changing banks. That's probably true for most customers. But there will be that 5% or 10% that becomes so incensed that they leave.
In the end, what amazed me most was the attitude of the bank manager. She clearly thought that in following the bank's dishonest and confiscatory rules, she was in the right. She didn't recognize that the bank was commiting a kind of thievery, and that she -- as the bank's agent -- was facilitating the thievery. She clearly felt that the big fines levied against me were justified, despite knowing that I tried to prevent the overdraft the day before Christmas. I almost feel sorry for her; I couldn't imagine having such skewed values.
How It Ended
Having threatened to make the bank manager "regret" what she was doing, I had to do something. My impulse was to run back and shoot her full of holes, but spending the rest of my life in jail wasn't an option. And then I realized that my natural talent -- writing -- was the way to get revenge. I wrote her a letter (which I slipped through the door) in which I promised to wage a publicity campaign against the bank. I told her that I would do all of these things:
* Post a negative review on Yelp (which I did that evening and included a copy with the letter);
* Post negative reviews in other venues on the internet, such as in online phone books (imagine how much business the bank might lose if every time a person looked up their phone number they found a negative review);
* Write a negative article about the bank on my blog (this article);
* Write letters to local newspapers;
* Write to the bank president;
* File a complaint with the U.S. Consumer Financial Protection Bureau (which has regulatory power over banks); and
* Complain to my congressmen about unfair banking practices.
I also made it clear that as long as I had an active account at the bank, I would feel free to conduct business in her branch. (The police had ordered me to stay away, but they had no authority to do so, or power to enforce such an order.) Without intending to, I had apparently spooked the woman, because that evening I checked my balance on the internet and most of the fees had been refunded.
I then wrote another letter telling her that one more check was coming in, and that I wouldn't consider our dispute to be settled if that check bounced and caused me additional fees. Well, that check came in and was cleared. In the final analysis, I paid $13.34 in fees. It's not much, but I'm still not happy about it.
Not everyone has a razor-sharp pen like I do (or a temper like I do), and most people will not want to wage the campaign that I was ready to wage. I do, however, encourage people to leave banks that treat them badly (Citizens Bank in particular!), but they also must be careful to keep track of their bank balances.
My new bank is smaller, and they clear checks from smallest to largest. Their fees are also lower. I have the same online access to my account that I had at Citizens, and I also have the bill-pay feature -- and all of it is free. Since I overdraw my account only once every three years, my overall expenditure on the account will be low. Their network of cash machines is smaller, but I rarely use cash any more.
I found out before my Citizens account closed that if you have a negative balance, they charge a negative balance fee of $6.99 every three days, which my new bank does not. Also, my new bank doesn't charge any fees to link accounts, so my savings account can be used as a backup for my checking account (Citizens charges a $30 yearly fee). As I write this, I've been using the new account for a couple months. The new bank's web site is easier to use than Citizens'. The bill pay feature, especially, is easier to set up than Citizens'. Furthermore, my new bank sends me a monthly statement via snail-mail which they don't charge me for (Citizens charges $2 per month).
The Damage
The damage that this incident did was mostly psychological. First, it ruined Christmas Day for me. Knowing how mercenary banks have become, I started to worry about how much I was going to be charged the moment that I learned I couldn't make the deposit. I said above that I assumed that they would refund the fees, and for the most part I did, but there was still that nagging worry that they would be unreasonable.
But the psychological damage goes beyond Christmas. When the institutions that you rely on are trying to take advantage of you, to steal from you, it makes you feel like the world is against you. The fact is, I had read about their new check-clearing policy just a couple weeks before, and I was disgusted, so the negative feelings about the bank had already begun. I had already made a decision to move to a new bank, but just hadn't gotten around to it.
* * *
More bad bank experiences
I think this article is going to become my "bad bank" article. I've had a few more unpleasant experiences that I'm going to post here.
New York Bank
This experience happened thirty years ago at least, about five or ten years after cash machines came on the scene.
I had an account with New York Bank on Fifth Avenue. I don't precisely remember the chain of events, but I was in the foyer of the bank at the cash machine. I must have looked puzzled because a man who was coming into the bank asked me if I needed help. I was depositing a paycheck into the cash machine. My balance was very low, and I needed money. The man informed me that I could immediately withdraw money against any check that I deposited, and he made it sound as if this was a wonderful service provided by the bank. I asked him if he was sure, and he said that he was sure because he was the bank manager! So I deposited the check, and then made the withdrawal.
When my bank statement arrived later (this was before the internet or online banking), I discovered that I had been charged a $7 fee! Now, $7 may not sound like much, but it was the equivalent of $20 or $25 in today's money. In fact, that was the standard amount that banks charged for overdrafts in those days. So I returned to the bank to express my displeasure. The bank manager wasn't in at the time, and the subordinate who talked to me adamantly refused to refund the fee -- even though it was the bank manager who encouraged me to make the withdrawal (and who had not informed me that I'd be charged an overdraft fee if I did). I didn't yell that day, but I walked out of the bank in a state of amazement that they could be so unfair.
I decided not to bother arguing with them any more. I proceeded to spend my balance down to zero, then I deposited a bad check from an old account, and I withdrew $10 to compensate myself for the fee and for my displeasure.
HSBC
This happened either in the late 1990's or early 2000's, the time when credit-card banks started to find new ways to increase their customers' interest rates. Today, if you develop bad credit with another company, your credit-card bank will use that as an excuse to raise your interest rate (even if your record with them is good). If your credit record shows that you are over-extended with debt or credit, your credit-card bank will use that as an excuse to raise your interest rate (even if your record with them is good). If you have one or two late payments, they will use that as an excuse to increase your interest rate.
It was sometime around 2000 that HSBC told me that they were going to increase my interest rate from 16% to 21%. I asked them why, and the reason they gave was that I had been one day late with two payments one year before! (that was in the days when credit-card companies gave their customers a grace period during which they wouldn't incur a fee). In truth, I think they probably increased my interest rate because I became over-extended with debt. I had become over-extended because I had lost my full-time job and was doing temporary work, and therefore was depending more on credit than I had before. I was, as you would expect, incensed that they would raise my interest rate for such a flimsy reason. I had worked very hard to have good credit, and for them to treat me as a bad credit risk because two checks had arrived during the grace period was ridiculous to me.
I called them up and let them know how I felt. I insisted that they reduce my interest rate back to 16%, and their response was, "We can't do that." I told them that I would not pay another bill until my interest rate was returned to 16%. Well, they didn't fall for my bluff. The thing is, it wasn't a bluff. I never paid them another cent.
Using flimsy pretexts to increase customers' interest rates strikes me as yet another stupid practice of the banks. If a person is over-extended with debt, it usually means that the person's income has dropped. To increase such a person's interest rate (or, as some banks do, to increase the minimum payment) just makes it all the harder for the customer to pay his bills. That encourages people to default. Banks keep shooting themselves in the foot, and I don't know why.
Another way they shoot themselves in the foot is by loading fees onto the accounts of people who are having financial problems. That backfires in two ways. First, it increases the burden of debt on the customer at a time when the customer can't afford it. Second, once the customer sees how much the debt has ballooned from the added fees, he may start to feel cheated and taken advantage of -- and that encourages people to default.
Capital One
After closing a credit-card account with Capital One, I was issued a new card that I didn't ask for. Even though I wasn't happy with Capital One, I decided to put the new card in my wallet in case of an emergency. Well, one day I whipped out the card by accident and charged $135 on it (I meant to use a different card). Even though the card had only a $100 credit line on it, the charge went through. By the time I realized my mistake, Capital One had levied two fees on the account totalling $78. So before I could even make my first payment, I felt that I was being ripped off. Capital One wouldn't remove the fees. That meant that if I paid off the $135, I would still owe them $78 that I felt they didn't deserve. If they had removed the fees, I would have paid off the balance immediately and closed the account. As it was, I never paid anything because I knew they'd dun me for the fees forever.
Now, you may say that it was my mistake because I used the card, but I don't see it that way. First, I never asked for the card. Second, they didn't decline the charge, which they should have. Third, the $78 in fees were unreasonably high. Also, knowing that I used the car by mistake should have swayed them to some extent. As I said above, I never paid anything, and a few years later the account had ballooned to over $900 (from accumulated fees), which just made me laugh. I eventually settled my other Capital One account for $400 more than the principal, so I felt that they got enough money to cover this account too.
All these things that I've mentioned here provide a good argument for strong governmental regulations. Banks don't actually know what is best for them. Left up to their own devices, they bully and alienate their customers.
(We did eventually get that strong government regulation in the form of the Consumer Financial Protection Bureau. But as I speak, Donald Trump's appointee to head the bureau is doing everything he can to make it ineffective. All the poor people who voted for Trump didn't anticipate that he might screw them.)
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* "RBS" stands for Royal Bank of Scotland, of which Citizens Bank is a subsidiary. There are many banks named "Citizens" across the nation; the bank I am speaking of has its headquarters in Rhode Island.
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