It turns out that maintaining those cards is a pricey venture for the poor, downtrodden banks.

I received notice from Citibank last week that a card I haven’t used in … oh … seven years … will begin having a $60 annual fee starting April 1st. The only way for me to avoid this fee is to use the card, to the tune of about $200 per month in charges.

That’s not that much and I could actually easily wrangle a way to do it, except that I don’t want to. Our family is trying to whittle down credit cards, not add usage. But closing this particular card down would be particularly damaging to my credit score – not only is the limit very high, but I’ve had the card for ages. In the “decades” range. Closing it would take away one of my oldest lines of credit and would dramatically impact our available credit, two of the factors that goes into the computation of your FICO score.

It’s not just Citibank adding these fees, of course. From the LA Times:

Bank of America Corp. unleashed its own annual fee of as much as $99 on some cardholders last month. JPMorgan Chase & Co and Wells Fargo & Co. both say they have no plans to introduce such fees, but it’s probably just a matter of time.

Citi isn’t saying how many of its millions of cardholders nationwide are subject to the new fee, which takes effect April 1.

According to that same article, closing an account can impact your FICO score up to 100 points. That is insane.

To illustrate what a change in score of 100 points would cost you if you were to take out a new 30 year mortgage, we can use a handy little calculator that the FICO people were kind enough to put on their site.

Let’s say you have a credit score of 725 before Citibank told you that your inactivity is causing them too much financial distress. If you wanted to take out a $150,000 mortgage, you would be looking at a rate of about 4.834% (as of March 8, 2010). The total amount of interest you would pay over the lifetime of the loan is $134,430.

Now, let’s say you close your account with Citibank because you don’t want to pay their stupid fee – if you’d wanted a card with an annual fee, you would have chosen a different card in the first place, right? – and your score drops to 625. Same loan, same principal amount, but because you did NOTHING – no late payments, no foreclosures – besides tell a bank to close your account, your rate goes to 6.201% and the total interest paid on the loan is $180,768.

That is a difference of $46,338, about $130 per month.

It sure seems, given an example like that, that paying the annual fee is worth it, right? But no – that’s NOT right. I mean, if you’re actually shopping for a mortgage at the moment, pay the fee and get the mortgage, and then close the account so you don’t get hit every year after that, but that’s not the point! Your credit score should be a reflection of your behavior, not of a bank’s revenue model. If you have good credit because you pay your bills and don’t over extend yourself, does it seem right that a bank could cause you to spend almost $50,000 more for a loan just because you don’t see a need to pay an annual fee on a card you don’t use?

The system is completely messed up. That’s all I’m saying.

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It seems pretty clear to me, after reading dozens of diet books and plans, that Michael Pollan is the voice of reason when it comes to healthy eating – “Eat Food. Not too much. Mostly Plants.”

Pollan has managed to write several books based generally around this theme, fleshing out how this basic rule applies in our corporate, Frankenfood world in books like Omnivore’s Dilemma, which traces the origins of four meals, and In Defense of Food, a book that tries to explain why futzing around with simple foods almost never ends up being a good thing.

I’ve read dozens of “diet” books and plans, and they all end up basically saying the same thing Pollan says, if you really want to squeeze them down to their bare bones – “don’t eat crap.” Don’t eat refined sugar, don’t eat too much processed stuff. Eat more whole fruits and vegetables. Lay off the chips and candy. Soda – are you kidding? Be aware of what you’re eating instead of mindlessly chowing while your brain zones out on the latest episode of American Idol. Use some common sense.

And yet, if you watch any diet plan that starts with these sensible and simple rules, you’ll see that before long people start to screw it up. Just can’t leave well enough alone. Have to start jacking with the principles in order to make it more user friendly, to the point that for a lot of people, it isn’t even in the same ballpark as the original plan – and then they wonder why it isn’t working.

Take, for example, Weight Watchers. I’m a fan of Weight Watchers as a plan, but I remember when I was young and my dad started Weight Watchers. The man lived on canned spinach, tuna, pickles and kool-aid. Sticking to those four foods probably a good plan, considering some of the foul recipes that were being pushed by Weight Watchers at the time, but that’s not the point. The point is that that plan was strict, and it worked. Over time, nutritional lessons have been learned that probably would have suggested that he back off of the salty pickles and the sugary kool-aid, but overall the point was an adherence to a pretty austere plan.

Fast forward to now. If you go to a Weight Watchers meeting, you’ll hear that you can eat whatever you want, as long as it falls within the points level for the day – and even that’s not entirely true, because you have floater points that you can use during the week if you have a Super Bowl party or a wedding reception to attend. Sure, the leader will tell you that it’s best to plan ahead for these events by eating before you go or perhaps bringing a bag of carrot sticks to eat on the sly (nobody will notice that you’re eating a carrot if you hover near the Cheeto bowl, right?), and hey – if you make a few bad choices, it’s OK, just get back on the bandwagon the next week. In fact, come to the meeting and tell everyone how much spinach-artichoke dip you were able to balance on those carrot sticks you brought along – it’ll get a good laugh and make everyone else feel better about the cheating they weren’t even considering confessing to in the meeting.

Folks, let’s face it – there is a point, when you are overweight and need to shed pounds either for your health or your vanity, when you need someone to tell you to cut the crap. And by cut the crap, I mean cut the crap food out of your diet, cut the crap excuses you make for when you screw up, cut the crap rationalizations for why “this” food that is totally not acceptable in the plan you have chosen to follow is all of a sudden OK just this once or forever, and cut the crap when it comes to letting your friends and family talk you out of getting healthy. Going to a meeting and talking about how to get around the rules is not cutting the crap. Creating bizarre concoctions to get around eating fresh fruits and vegetables and simple meats is not cutting the crap.

Switching gears from my dad to myself, last year I began reading a bit about a fitness regimen called CrossFit. Go to the link if you want to learn more, not the focus of this particular post except to note that in December, a CrossFit box opened in my little town and by that time, I was intrigued enough to give it a try.

Two months later, I had lost almost 4″ in my waist, with similar losses elsewhere, and my upper arms were completely transformed, but I hadn’t really lost any weight. I could grant that there was significant muscle gain with those kinds of inches lost, but still – I thought there would be at least 10 pounds by that point. But I finally accepted what my trainers had been saying since Day One – “you can’t out-train bad nutrition.”

So, I started reading up on eating plans. My trainer suggested The Zone but that seemed like a big pain to me, so I started looking at the Paleo Diet. The difference between the two for me was that it seemed easier just to drop most of the processed carbs entirely than to try to figure out how to portion them well with everything else – I know my weaknesses when it comes to pastas, breads and crackers, and I know I need to go cold turkey for a while, even so far as potatoes and rice. So I started reading about the Paleo Diet, which is essentially:

· Plants
· Roots and tubers
· Berries
· Fruits
· Nuts

The most obvious plant food missing is grains and grain products. If you can concentrate on fresh versions of the plants above – and eliminate or drastically reduce grains, grain products, sugars, and sugar products – you will be well on your way to eating the plants that fit your genetic consitution.

[...]

·Wild terrestrial animals (including the muscle tissue, fat and organs, although the total amount of fat and the fatty acid composition were quite different than that found in modern domestic animals).
· Fowl
· Insects
· Fish and seafood
· Eggs

Okey dokey. No sugar. No salt. No dairy. But then the more I read, the more I realized people just couldn’t leave well enough alone. It didn’t take long to find a site that offers books on how to make “paleo friendly” noodles, chocolate desserts, bread and more. Now, I haven’t seen the books but I have seen plenty of paleo recipes online and it seems to me that they’re really stretching the theory in order to help people fit the “diet” into their regular eating routine, but hear me out on this – if the point of picking this particular plan is to move away from eating salty, sugary, starchy foods, why in the world would you want to try to duplicate those tastes and textures? How are you ever going to lose the taste for them? I’ll tell you what’s going to happen – you won’t. You’ll eat some poor substitute for a chocolate cake and unless you are one of the few people who will truly prefer it, at some point you will say, “screw this, give me a molten lava cake – and heavy on the ice cream, please.”

So here I am. I am going to try very hard for one month to not eat sugar, salt, dairy, grains, or potatoes for one month. I’m not going to go out of my way to figure out how to make something taste like something sugary, salty, dairy-y, grainy, or potato-y. I may not succeed – in fact, I’ll be a little surprised if I make it a week. But I’m putting myself on notice to at least be honest about the effort and not try to say I’m following it but with this, this and this modification.

Wish me luck. And strength. It’s the salt that’s gonna get me …

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Then yesterday, two unrelated things came together to get me thinking more on this whole credit card legislation.

First off was an article a friend posted from the New York Times blog section about what can or cannot be sold at school bake sales in New York City:

Nine months after effectively banning most fund-raising food sales in city schools, a city panel will vote Wednesday on an amended regulation that will allow student groups to sell items like Pop-Tarts and Doritos during the school day, but not brownies, zucchini bread or anything else homemade.

[...]

Under the new rules, students may sell fresh fruits and vegetables, or one of 27 specific packaged items that have been approved for sales in city vending machines, between the start of school and 6 p.m. on weekdays. The same goes for parent groups, except for an exception carved out for one no-brownies-barred Parent Teacher Association bake sale during the school day per month.

No homemade or unpackaged items are on the list of “approved” foods because “it’s impossible to know what the content is, or what the portion size is,” said Kathleen Grimm, the deputy chancellor for infrastructure and portfolio planning, who oversees the regulation.

And then there was a comment on my post from Bret over at Hope to Prosper:

I have been following the CARD Act since it was the Credit Cardholders Bill of Rights. And, I am so glad consumers have finally received some reasonable protections from these unethical practices. It amazing the banks got away with it for so long.

You can see, obviously, how those two things go together, right?

Just kidding. They don’t. Not really. Except that …

The debate about whether or not schools should allow homemade snacks to be sold at sales, versus Doritos, is whether or not children are able to make good choices about their eating without nutrition information readily available, and of course there are no labels on Mom’s Chocolate Chip Cookies. I don’t know that I agree with the logic or the proposed solution, but that’s irrelevant, especially since I don’t like in New York City. But this decision, along with rules requiring nutrition information on the menus of chain restaurants, the banning of transfats in restaurants, smoking restrictions, seat belt and helmet laws … all of these are rules that the government has put in place to protect you from yourself, or to protect those around you from your choices, and there’s always some screeching about how they infringe on our right to live our lives in freedom and in control of our own choices.

When it comes to credit card regulations, though, I’m really not aware of too much outcry from consumers about how these new regulations are a nanny state move, how consumers have the ability to change credit card companies any time they want, nobody’s forcing you to use a credit card, etc. The only thing I’ve really seen is commentary that the changes will increase interest rates on cards in general, which is completely logical and (in my opinion) not necessarily a bad thing for consumers in the long run.

Assuming that I’m not just missing massive media coverage of protests defending the banks’ rights to gouge, I find this double standard interesting. When it comes to labeling food, demanding that food producers not make foods that are downright harmful, or that restaurants disclose the calorie counts in their meals so that consumers can make an informed decision about what we’re putting into our increasingly bloated and disease ridden bodies, people get all huffy. When it’s credit card regulation that will almost inevitably force people to spend less and buy less stuff, it’s amazing that “they” (the banks) got away with it for so long.

Doesn’t this seem a little bit odd? Or is it just me?

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Is easy to think of renters as being somewhat shielded from the mortgage crisis since, well .. they don’t have a mortgage! Once you think it through, though, you realize that someone is paying a mortgage on that property and if they aren’t paying their bills, the bank isn’t going to cut a renter a break just because he or she is an innocent victim.

And, still again because I haven’t been a renter in fifteen years, I didn’t much think about it again until a friend sent me a story about a law that passed in May 2009 and how it protects tenants … if they know about it. From CNN (emphasis for particularly eyebrow raising bits mine):

Under the Protecting Tenants at Foreclosure Act, which Congress passed last May, tenants like Pearson are usually eligible to stay after the property has been foreclosed as long as they have a valid lease and are paying their rent regularly. Even renters on a month-to-month lease get 90 days to leave.

But tenant advocacy groups charge that lender representatives, including some unscrupulous real estate agents, have been preying on tenants’ ignorance. They pressure renters by sending them misleading letters that drive some out.

One letter sent out by a Texas law firm stated, “This letter constitutes formal and final demand that you vacate the premises within three days[emphasis ours] of the date this letter is delivered.”

Worse, the message threatens legal costs if tenants don’t comply. With that facing them, many fold their tents.

“The average person wouldn’t know the law has changed,” said Robert Doggett, an attorney for Texas RioGrande Legal Aid. “People assume they have to leave.”

There is no official data identifying the number of people who have received such letters, but advocates think it could be quite high considering the number of properties bought for investment and rented out during the boom years.

The attorney general of Connecticut, Richard Blumenthal, has fielded numerous complaints. “Potentially, it could be affecting thousands of tenants,” he said. “We’re warning banks and real estate interests: foreclosure is not excuse for illegal eviction.”

Early in February, he sent out cease-and-desist letters to 15 lenders, including such big names as Wells Fargo, HSBC and Citibank, nine law firms and six real estate companies, urging them to comply with the act.

The banks all denied any intentional wrongdoing. Some did say they have absorbed huge volumes of foreclosed properties with little, if any, infrastructure in place to handle the extraordinary number of repossessions.

In fact, many often contract with outside companies — law firms and real estate brokers — to handle the workload. And in some cases it may be those contractors who are overstepping the bounds, without the banks’ knowledge, according to Gabe Treves, program director at California advocacy group Tenants Together.

I’m not sure what exactly is “misleading” about a letter that states a demand that tenants vacate. There’s no request there, no “by the way, the owner of the building you live in has fallen behind in their payments and this property will be foreclosed, just wanted to give you a heads up that at the end of your lease, you may have to move,” all I see is a notice to vacate immediately. I know the author is trying to be fair, but I think it’s a poor choice of words.

And as for the banks denying any wrongdoing and claiming that they’re just overwhelmed, well, I am a little speechless on that front. Not really, of course, but the words tumbling through my brain are not particularly kind and I’m trying to think of how to put this …

I find it interesting that the banks had relatively little problem finding the infrastructure to produce extraordinary numbers of loans and found a way to slice, dice, package and sell them to investors over and over again. They certainly have the infrastructure to tell homeowners that they aren’t going to modify their mortgages (granted, that’s pretty easy) but to offer refinances quickly and easily for a fee. But when the inevitable repossessions that they knew would come from lenient lending and a refusal to modify loans come to fruition, they come through with what sounds like some lame, “we apologize, please be patient, we’re doing the best we can” line of garbage? I’m sorry, but when your minions send out letters to people saying they have three days to get the heck out, and when Americans have seen how little concern you have for their issues, that just doesn’t fly. And why is the Connecticut AG “urging” them to comply with the law? Shouldn’t that sentence read something like, “Early in February, he sent out cease-and-desist letters to 15 lenders … telling them to comply with the law or face immediate and incredibly painful financial consequences, up to and including a cease and desist of all underwriting of new mortgages so that they can shift some ‘infrastructure’ to properly deal with their mess?”

Sigh.

I know that would be asking too much. In the meantime, if you are a renter and someone shows up at your door to tell you to vacate, consider it perfectly OK to stick your thumbs in your ears, waggle your fingers and say, “neener neener, MAKE me.” If you get a letter instead, feel free to still do that out loud if it will make you feel better (it would me), and then politely send a letter back stating that you appreciate the notice that the owner of your property has lost the home, let them know when your lease is up, and tell them you’ll be forwarding their letter to your own state’s Attorney General so that he or she can kindly assist the bank and their contractors with a better understanding of federal law.

Major terms of the law, according to the Housing Authority of the City of Los Angeles, should you need them:

- During the term of the lease, the tenant has a right to remain in the unit and cannot be evicted, except for actions that constitute good cause.

- If the lease ends in less than 90 days, the new owner may not evict the tenant without giving the tenant at a minimum 90 days notice.

- At the end of the term of the lease, the new owner may terminate the tenancy if the new owner provides a 90-day notice.

- The new owner may terminate the tenancy if the owner will occupy the unit as a primary residence, and has provided the tenant a notice to vacate at least 90 days before the effective date of such notice. This is the only exception to the rule that the tenant may not be evicted during the term of the lease.

These provisions expire on December 31, 2012.

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Gone are the days when I look forward to seeing an actual letter from a person, of course. Almost all of my correspondence with family and friends is via e-mail, except for an occasional letter from my mother and the usual holiday and birthday cards. Actual paper mail is a mix of magazines I desperately (and usually unsuccessfully) try to keep up with, store fliers, coupon mailers, bills, and then my actual love/hate sources – credit card offers and insurance and medical statements.

I hate the insurance and medical statements. Let me be clear on that. Every time I see a statement from a doctor or an insurance company, it means I’m about to spend an hour on the phone explaining to rep after rep that no, we don’t owe any money, I’m not going to send any money, I’m not going to work it out with my insurance company or my provider (they always try to punt it to each other), and believe me, the LAST thing you want is for me to stay on the line to answer a few brief questions about the quality of service I received.**

You know what I love, though? I love credit card correspondence. I love balance transfer offers, I love low introductory rate offers (and how they’re going to mess with me when the rate flips), and I really love the recent letters from banks telling me about how they aren’t going to be quite as unpleasant as they used to be. I know they hated having to send those, and it makes me smile.

And you know what? I actually read them. And since I’m just a sharer by nature, I thought I’d go through one I recently received from Bank of America for a card that I never use and point out a few things that stood out. Not everything, just the bits that I thought were amusing – and I understand that my sense of humor is apparently twisted, finding any humor in stuff like this.

I’m picking on Bank of America because I have their letter handy, but consider any comments here an open statement to all banks …

Ready? Here we go.

Payment Due Dates

For your convenience, your payment date will always fall on the same date each month and will be at least 25 days from the closing date printed on your statement.

Thanks guys! I appreciate that you won’t be changing my due date arbitrarily, which you used to do occasionally to knock people off balance and get a few late fees in before they adjusted.

Default Pricing

We are deleting the Default Pricing section of your Agreement. This means that your rate for existing balances will no longer be raised for being a few days late with your payment.

That’s good news, especially considering the gaming with due dates that banks have been accused of, and also a little tidbit concerning the time of day that payments will have to beat in order to not be late, which I’ll hit in a minute here. Basically, as long as you are not 60 days late, your rate will not change. And even if you do trigger a default rate change, it can be adjusted back down once you make 6 monthly payments on time. Note that this impact is a change in policy for EXISTING balances. Banks can still raise your rates for future transactions even if you’re not 60 days late – more on that later as well.

One more bit on the default pricing though. If any of your cards are already at a penalty (higher) rate for being late, then B of A’s policy is as follows:

… those rates will remain in effect until you make each Total Minimum Payment Due by its Payment Due Date and do not exceed your credit limit for 6 consecutive billing cycles starting with the first billing cycle after the Penalty Rate is in effect. At that time we will lover the margin for each of these variables APRs by at least two percentage points. These will be your new Standard Rates.

I am not entirely positive, but I believe this means that if you ended up with a penalty rate in October 2009 and these rules go into effect in February and you’ve been well behaved in the meantime, you should be able to ask for a rate decrease soon – but they only state that they’ll reduce you a little bit and that’s your new regular old non-penalty rate.

Would you think, after bring your account current and maintaining it for six months, that a bank telling you that your reward is going from a 30% rate to a 28% rate would be particularly … rewarding? I wouldn’t …

Overlimit Fee

As of the effective date, we will no londer assess an Overlimit Fee on this account. However, keep in mind that we may decline and transaction that would cause you to exceed your credit limit.

Imagine that. Putting a limit on what you can spend and actually cutting you off when you go above it. Novel.

Our Rights to Amend Your Agreement

This bit is about when they can change your rate and for what reasons, the above penalty rate stuff notwithstanding.

The reasons we may change the terms of this Agreement include the following: your risk profile based on your payment patterns, transaction patterns, balance patterns, and utilization levels of this and other accounts, credit bureau information including the age, history and type of other accounts, and relationships between each and all of these measures of risk. We may also change terms for reasons not related to your individual credit history, such as overall economic and market trends, product design, and business needs. APR increases will not impact existing balances unless you are more than 60 days late with a payment.

In other words, “if we wanna.”

How We Will Allocate Payments

If your account has balances with different APRs, we will allocate the amount of your payment equal to the Total Minimum Payment Due to the lowest APR balances first. Payment amounts in excess of your Total Minimum Payment Due will be applied to balances with higher APRs before balances with lower APRs.

The impression given throughout most of this legislative process was that payments would be applied to higher APRs first, period. This policy is a significant difference. If you only make minimum payments, your higher rates will still sit out there racking up charges faster than the lower rate balances.

And finally …

Payment Cutoff Time

This one really made me smile – I had never really paid attention to the distinction bit it’s a good one:

We credit mailed payments as of the date received, if the payment is: (1) received by 5 pm local time at the address shown on the remittance slip on the front of your monthly statement; (2) paid with a check drawn in US dollars on a US financial institution or a US dollar money order; and (3) sent in the return envelope with only the remittance portion of your statement accompanying it. Payments received by mail after 5 pm local time at the remittance address on any day including the Payment Due Date, but that otherwise meet the above requirements, will be credited as of the next day. Credit for other payments may be delayed up to five days.

What this means, and this is important because I’ll bet if I had a checking account at Bank of America, they’d be all about pushing me to use their online billpay service, is that if you use online billpay via your bank and your bank doesn’t have automatic clearing with Bank of America, your payment can arrive up to five days before the due date and you still might get dinged with a late fee, because an online bill payment will not be sent from your bank in the return envelope provided with your statement and it won’t have the remittance slip. And, if you choose to go with paperless statement delivery for your credit card, you won’t have a return envelope either, so any payments need to be sent well in advance of the due date. Now, to be fair, most banks probably do have an automatic electronic clearing for online billpay with a bank as large as Bank of America (with smaller billpay recipients, a physical check is cut from your bank), but still – I found the three conditions put together to be an interesting way of saying, “we might hold your check, even if you wrote your account number on it for us, for quite a long time in this electronic day and age.”

So there you have it. My amusement with big banks, shared with you.

**Note: I do not hate the people who answer the phone and have to deal with me – I pity them, for the most part, because I couldn’t imagine working in the insurance industry or in the billing office for a medical medical provider. If Dante had written the Inferno today, he would have yanked the First Circle out entirely and sent those nice folks on their merry way, knocked Two through Seven up a notch, and added a new one for the insurance industry just as a lead in to Eight. The whole system is one big amazing mess and between you and me, I’m willing to bet that if you broke down who is for single payer health insurance versus who is against it, the majority of people who are against it have never had to deal with settling issues for procedures that involved medical buildings, surgeons, assistants, anesthesiologists, and recovery staff who all bill separately. It’s absolutely, completely, 100% ridiculous and out of hand. That’s all I have to say about that.

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