Van Nuys resident Richard Levinson figured he was getting a pretty sweet deal when JPMorgan Chase & Co. offered to charge an average 4.5% in interest if he'd transfer his outstanding credit card debt to the bank.
Levinson, 54, a musician, planned to use the Chase account as a rainy-day fund that would cost relatively little to maintain.
"I work in an industry where I can never be sure of my income," he told me. "This provided me with cash at an interest rate that was guaranteed for the life of the loan."
Now Levinson finds himself among about 1 million Chase cardholders who have been notified that their monthly minimum payment will more than double in August to 5% from 2%.
"They're essentially calling these loans," he said. "They either want their money back or they want to force people to default so they can charge rates closer to 30%."
Higher minimum payments aren't necessarily a bad thing. For many consumers, credit card balances turn into an endless cycle of debt that they're never able to escape. Paying more each month can fix that.
But what Levinson and numerous other cardholders affected by the new policy believe is that Chase is indulging in a little bait-and-switch.
They say Chase finds itself saddled with a lending program that isn't raking in as much cash as the bank desires during these recessionary times, and is thus trying to put an end to the low-interest loans by making conditions tougher for customers.
Needless to say, that's not how Chase sees it.
Stephanie Jacobson, a Chase spokeswoman, said most cardholders who received "promotional low-rate financing" over the last five years have paid off their loans.
"However, there have been a small percentage of customers that have not made as much progress in paying down these loans," she said. "Our desire is to have these loans repaid in a reasonable period of time."
Jacobson acknowledged that many of the hundreds of thousands of cardholders who received notice of the higher minimums participated in the same balance-transfer program that attracted Levinson.
But she said Chase isn't reneging on its deal -- it's not raising interest rates.
"We're just increasing the minimum payment due," Jacobson said.
She declined to comment on the timing of the move or complaints from cardholders that the higher minimum in effect makes the loans too costly to keep.
