Expect Your Credit Card Rate to Go Up

Just the other day, I received a notice from our credit card company. In short, the letter was explaining that our credit card rates would be going up as of January 1, 2009. My husband and I use our credit card responsibly, practice good money management and pay off the balance every month. We have never missed a payment and have never been late. So, why is our credit card company hiking up the rate by over 10 percent?

The economy has forced companies everywhere to make changes to their policies and procedures. However, consumers from around the country are still wondering “why them?” Although the Federal Reserve recently cut the benchmark rate to 1 percent, many people’s credit card rates are still going up.

Traditionally, when the Federal Reserve cuts rates, credit card companies slash their rates as well. This is a good sign for consumers because their monthly payments are reduced every time interest rates are reduced. So, why the disparity now? Credit card companies and other financial institutions are trying to offset the rising costs of credit card operations with higher rates and fees.

It used to be that high rates and fees were distributed among higher-risk consumers. Not anymore. Credit card rates and fees are being raised even among low-risk consumers. Banks, financial institutions and credit card companies have really tightened the grip on risky consumers. Now, responsible consumers that pay their bills on time are being hit hard with higher rates and more expensive fees. Everyone will soon find it much more expensive to carry a balance on their credit card.

People are finding it more difficult than ever to get and use credit. Consumers around the country are also finding it more expensive to live off of credit these days. Even though the Federal Reserve is cutting interest rates, credit card companies are raising them to offset the rising cost of credit card operations. Simply put, you can expect your credit card rate to get higher just like mine has.

This entry was posted on Monday, December 1st, 2008 at 8:49 pm and is filed under Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.