What a Deal! (Sneak)

Two themes for this essay: Always read the fine print....and isn’t it sad that banks now seem to have the ethics of "Push, Pull or Tow!" used care salesmen ?

I am looking at a marketing mailing sent me by my bank, one of the largest and oldest banks in the country. I seem to get such mailings at least once a week, all urging me, in one way or another, to borrow more money from this bank. (I have one of its credit cards.)

Carefully examined, this mailing skates close to being a pure huckster’s pitch. God help anyone who doesn’t read what’s buried in the fine print. (Fifty years ago, no respectable bank would ever have sent out stuff like this, but then, fifty years ago, banks weren’t in the business of convincing people to borrow money at high, variable interest rates. That kind of thing was left largely to pawnshops.)

The first thing I saw when I pulled this out of the envelope was a red headline that proclaimed “Now--an opportunity to take your credit card balances down to zero.” Because I’m “a valued customer,” the piece goes on to say, I can now get an “unsecured loan up to $50,000*” to pay off “expensive credit card debt†” at “competitive non-variable rates.”

Uh-huh.

To begin with, always beware of flattery. My bank--or rather, the computer that generates this stuff-- does not know me well enough to be realize how truly, truly special I am. This isn’t an pat on the back or a good citizen award, it’s a pitch to make money. Always keep that in mind when a company starts telling you how wonderful you are. Or in this case, how “valued” you are.

Next comes the part about how I can pay off “expensive credit card debt.†” The little symbol after the word "debt" is called a dagger. Daggers (†), asterisks (*) and so forth indicate that there are a few facts you really should be aware of tucked away somewhere in the fine print, where, if you're a trusting soul, you’ll never bother to go read them. But being a suspicious sort, I searched around and found the dagger, and learned that my bank “may prohibit use of this account to pay off or pay down any account issued by”......

.....my bank.

In other words, they want me to have the opportunity to quit paying high credit-card interest rates unless I’m paying those rates to them. Since most of my fairly modest credit card debt is owed to this bank, this deal is suddenly looking not quite so special.

Still, I can get an “unsecured loan up to $50,000*.” Note the asterisk. Another trip to the fine print. (In this case, the phrase “up to” has already hinted that I just might qualify for much less than $50,000, but one can always hope.) And there it is. “Your actual credit line could be lower than $50,000.” Oh, darn. I’ve got a feeling one has to have a large income to borrow that much. There goes my chance to buy the National Champion Arabian horse I’ve always wanted.

Still, I do have a little bit of credit card debt on another card and I can pay that off at “competitive, non-variable rates.” I might even be approved for their lowest APR (Annual Percentage Rate) of 7.99%††” Darn, there are two daggers this time.

Back to the fine print. “We may set your initial APR between 7.99% and 19.99%.” Whoa! That's quite a spread. What rate are we actually talking here? And what do they mean by “initial?”

Well, surely I can find out before I agree to the deal. After all, these are “non-variable rates.” I mean, any stays-the-same rate lower than what I’m paying now will still be a great deal, right?

Except that--when I check--I find that this rate isn’t actually fixed. The folks at the bank can change my interest rate whenever they want. They can change the fees involved. They can change the terms “at our discretion.” Says so, right in that half-the-size-of-everything-else fine print.

So how is this rate “non-variable?" Search, search, search....ah-hah! You see, it’s not tied to an index, such as the Prime Rate. It doesn’t vary automatically. It only varies when the bank decides to vary it. Got the difference?

Oh, there’s also a 3% transaction fee on any advance, and the loan length run from 5 to 8 years. So if I borrow $50,000 (I’d really, really like to have that horse and a barn and a trailer to go with it) I get to pay a $1,500 fee up front, then pay up to 19.99% per year interest for between five and eight years.

And I can call and set all this up in “as few as 10 minutes.”

Yep. Ten minutes to set up a loan that could leave me owing a huge chunk of money, for as many as eight years, at a rate that the bank can change any time it wants, that starts as high as 19.99% APR....and might just go higher. (I’m still worried about that word “initial.”)

What a deal! What a “major opportunity!”

What a crock.

Don’t assume that because a company is large and well-known, it won’t use tactics that would make a con artist blush. These days, you just can’t count on any organization (even, sadly, some that call themselves “non-profit”) being more honest and aboveboard than is legally required....and remember, such regulations are usually put in place in response to a lot of people being fooled first. And the flim-flam companies (and their lawyers) are always searching for new ways to not quite tell you the whole truth.

So always, before you sign anythng....

... check the fine print!