“”“being one day late with a payment or being one dollar over your credit limit jumps your interest rate to 29.99% forever”””
I hear this all the time as an example of wicked behaviour, but I wonder if people have data to back it up. Is there no signal in missing a payment by a few days? I know that if I were to miss a payment, it would be due to some minor issue such as I having been out of town when the bill arrived or such. The credit card company only knows that the payment didn’t arrive. Add in a bit of modelling stupidity (having an input boolean variable PAYMENT_LATE into the model) and you might get a jacking up of prices as the rational response.
All my credit cards jacked up their interest rates pre-emptively after the new regulations were announced (not that I have ever carried a balance on any of them). This indicates that it was not only about bait-n-switch (some of those cards, I have had for years).
I am honestly asking for data, not being knee-jerk pro-credit-card-companies.
If credit markets worked the way they were supposed to, the terms on which you could get credit would indeed depend on objective measures of your credit-worthiness. Any adverse event would appropriately cause the credit markets to downgrade their opinion of you, and worsen the terms on which you get credit. But I have never heard anyone seriously suggest that the data bear out a conclusion that being a day late with a payment indicates that you are a credit risk so massive that a 29.99% interest rate is appropriate.
“”“being one day late with a payment or being one dollar over your credit limit jumps your interest rate to 29.99% forever”””
I hear this all the time as an example of wicked behaviour, but I wonder if people have data to back it up. Is there no signal in missing a payment by a few days? I know that if I were to miss a payment, it would be due to some minor issue such as I having been out of town when the bill arrived or such. The credit card company only knows that the payment didn’t arrive. Add in a bit of modelling stupidity (having an input boolean variable PAYMENT_LATE into the model) and you might get a jacking up of prices as the rational response.
All my credit cards jacked up their interest rates pre-emptively after the new regulations were announced (not that I have ever carried a balance on any of them). This indicates that it was not only about bait-n-switch (some of those cards, I have had for years).
I am honestly asking for data, not being knee-jerk pro-credit-card-companies.
If credit markets worked the way they were supposed to, the terms on which you could get credit would indeed depend on objective measures of your credit-worthiness. Any adverse event would appropriately cause the credit markets to downgrade their opinion of you, and worsen the terms on which you get credit. But I have never heard anyone seriously suggest that the data bear out a conclusion that being a day late with a payment indicates that you are a credit risk so massive that a 29.99% interest rate is appropriate.