Recently, several credit card companies or issuers have raised their interest rates, and because of these moves of credit card companies the national average annual percentage rate on credit card offers also increased for the third straight week to 12.64 percent. This was according to CreditCards.com¡¯s Weekly Credit Card Rate Report.

Protecting themselves from rough economic setting and the impending regulatory changes or new laws, credit card companies have progressively been increasing the APRs these the recent weeks. And this week¡¯s banks raising rates were from American Express, Chase and Citi. Aside from these banks that raised their rates, the Wells Fargo is also planning to raise their interest rates. Hike on interest rates of Wells Fargo will be applicable on most of their credit card holders, interest rates will most likely rise by three (3) percentage points, and these will be in advancement of the ratification of sweeping new credit card industry rules.

Although the Bank of America guaranteed that there will be no interest hike between this month and February 2010 when the Credit CARD act will be in effect, these moves are still made by the credit card companies. And though the situation is still in the middle of the rising unemployment levels that threaten the profit banks and other credit card companies, some are still not planning to raise their interest rates.

The rising level of unemployment level is supported by data. According to information released earlier this October, it shows that on the month of September unemployment level or rate reached a 26-year high of 9.8. And according to Fitch Ratings reports, a record high in the month of August was reached by credit card charge-off rates; these are rates that measure debts that banks or credit card companies decide they are unable to collect. And in the coming months charge-off rates will probably continue in setting new records and will stay high until employment rises, according also to Fitch.

Credit card companies, issuers and lenders are saying that the latest charges are just attempts on their part to align the interest rate on new card offers with the APRs for existing cardholders. Desiree Fish, spokeswoman for American Express, said that, ¡°over the past few months, we raised APRs (on current card holders), so we want to make sure the acquisition offers are consistent with that.” And these current card holders according to Fish were repriced on their cards because of many external factors that she was hesitant to say. Fish also said that. “Our pricing has to be responsive to the business and economic environment.”

Experts are not expecting any improvement or change on the economic setting for the time being. New York Fed President William Dudley even branded the unemployment rate “much too high” and that the economic recovery could be “less robust than desired.”
While consumers are being hardened by the economic situation due to joblessness and tightening credit, the Federal Reserve’s monthly G.19 report on the month of August, showed that credit card balances fell by nearly $10 billion. This huge drop is blamed on nervous consumers that are reducing their debt and verifying their free credit report during the recession. And on the record, the 13.1 percent fall in card debt marked the 11th straight monthly decline, representing the longest pullback in balances.

All these have implications on our credit score.

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Posted by admin on February 4th, 2010 :: Filed under Uncategorized
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