CREDIT CARDS Companies keep eye on bottom line

Some credit card companies say they want to be less intimidating to customers who get in over their heads.
WASHINGTON POST
Tony has seen the two faces of credit card companies.
Deep in debt, the county government employee consulted a credit counselor, who helped him negotiate lower interest rates and smaller monthly payments on five of his six cards. The remaining company, however, not only refused to lower its rate but increased it, from 21 to 23 percent.
"I called them, let them know I was having a little hardship, but they wouldn't budge -- except to drop the rate back" to the 21 percent it had been, said Tony, who didn't want his last name used. By contrast, the other issuers dropped their interest rates to 6 percent.
Perhaps more than many consumers, Tony has felt the impact of the credit card industry's split personality.
More accommodating
It's true that during the recent economic downturn, some credit card issuers have become more accommodating to consumers who have fallen behind on their bills.
Bank of America Corp., for example, has retrained many customer service representatives to focus less on how many calls they can make in an hour and more on the problems of each cardholder. It created a Web site where consumers can set up their own collection schedules early in the delinquency, giving them some control and allowing them to avoid the embarrassment of discussing financial difficulties with a live person.
"We've tried to take out the intimidation factor," said Robert Box, president of Bank of America's consumer risk operations group. Box said the bank "had a cultural and philosophical change" about two years ago, including the realization that sometimes it may have been the bank's error that caused the consumer to be delinquent in the first place.
Meanwhile, Discover Card is mailing custom-made Hallmark greeting cards to many delinquent cardholders. "Right now you may be feeling a little overwhelmed by financial worries," begins one such card, which includes a toll-free number customers can call to find out if they qualify for lower interest rates and payments.
More demanding
But there's another, perhaps more familiar face to this credit card creature. As issuers have become softer-edged, they've also become more demanding. They're increasing late-payment fees to $35 and shortening the grace period consumers have to pay their bills without incurring finance charges (typically, to 20 days, down from 25). Customers incurring late fees -- and one survey shows that more than half did just that in the past year -- face increased interest rates.
Some companies, including First USA Bank, Chase Corp. and Capital One Financial Corp., are imposing punishing interest rates, in the 25 to 30 percent range, on cardholders who may be current in payments to their card but have fallen behind on other cards or taken out too many credit cards.
And while credit card companies seek new customers with offers of no interest on balance transfers, they're assessing high rates on new purchases charged to the card and often calculating interest in such a way that it's more costly than the monthly periodic balance rate that has long been the industry's norm.