Facing losses on bad loans, banks boost credit card rates

Nelson Brentlinger of Pueblo West, Colo., says he recently borrowed $5,400 from his Capital One card to pay mortgage bills because he was told he'd pay no interest for 18 months. But when Brentlinger made new purchases on the card and tried to pay them off at the end of the month, the issuer applied his payment to his 0% balance and charged him 17.99% interest on his new purchases.

Brentlinger says he felt misled, because no one told him that payments would be applied to the lower-rate balance first. He complained to state regulators and to Capital One. Eventually, the bank forgave his interest charges. Capital One said it did so as a "goodwill gesture" because a representative might have given him wrong information.

Still, Brentlinger isn't happy with the way he was treated. He suggests that if he, as someone who always pays on time, is being hit by unexpected new fees, other consumers will also be feeling the pain.

The experience "makes me feel very uncomfortable about credit card companies," Brentlinger says.

Contributing: Christine Dugas and Venuri Siriwardane

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