To its credit, Chase is ending a credit card practice that has had some consumers fuming in the past, both at Chase and other credit card companies that use it (which is most of them). Here's what they do that they're going to stop doing... Say you have a Chase credit card and you are late on your car payment, or you miss a payment on your American Express card. These late or non-payments then show up on your credit report. Chase is alerted to the change in your credit score, and then decides to hike your credit card's interest rate as a result. Yes, you didn't screw up on your Chase account, but you screwed up on other accounts, and so your interest rate goes up. Hardly seems fair does it? Well, at Chase at least, it won't be happening anymore (or at least not after March 1, 2008).

I commend Chase, because many companies give themselves the right to hike rates based on changes in credit reports, and Chase is (I think) the first to decide to stop. But the fact that this is newsworthy sort of shines the light on the many card company practices that leave their customers red-faced.

The question most people would have is, why do these companies have such a policy in the first place? The companies will say that this is a way to protect themselves, because if a customer is having trouble making payments elsewhere, then it stands to reason that the customer is becoming a greater credit risk. This makes some sense, but is it fair to jack up the rates on someone's existing balance, when the original agreement included a lower interest rate on those purchases? It would make more sense to simply shut the account down and force the customer to pay the existing balance. But of course that would make the card company less money.

I try to be even-handed in my coverage of the credit card industry, because it indirectly pays a large part of my salary and also because I think the industry is sometimes subjected to the pile-on effect, in which only the evils are highlighted and the benefits that many people get from credit cards are ignored. That said, credit card companies have come up with some nutty policies to make extra money and slipped them into the fine print, often in legalese that the average consumer can't grasp or has to spend hours sifting through to find the important points. And it appears the recent Congressional threats against the industry in general have been the impetus for some of the self-policing we're now seeing.

The smart credit card companies are at least tooting their own horn when they change some of the more bizarre practices. Might as well at least get some good PR from it.