Credit Card Interest Rates Rise as Holiday Shopping Season Hits
The holidays can be a difficult financial time for many Americans, especially in the midst of a recession. But things could get even tighter this year as many people with credit cards are about to get more troubling news as well.
According to The Denver Post, many credit card customers will soon receive notice that their interest rates are going up, giving consumers one more thing to worry about during the busiest shopping season of the year.
Credit card rates are doubling and even tripling for some people. Additional customers will see the fixed rates that they have enjoyed for a long time switched to variable rates. Even more will find that the credit card companies have increased the minimum payments that they must make.
The average interest rate across the nation is 13.7 percent. According to the Federal Reserve, this is on the rise.
According to the report, these hikes and increases seem to be linked to the new federal regulations that will take effect in February of 2010. These regulations will keep banks and credit card lenders from continuing the predatory practices that they have long depended upon.
This information has come to light via consumer surveying. Rasmussen Reports released results finding that half of those responding have had their rates increased by credit card companies.
Another report, issued by credit.com, found that one third of respondents had their rates raised unexpectedly recently. This was double the number reported in a survey six months earlier.
Businesses are concerned that the new rates, coupled with the already low consumer confidence and general economic state, will hurt sales during a critical season.Credit card spending is one factor in the increasing bankruptcy filing rates across the country. Unsecured debt may be included in a chapter 7 bankruptcy case.
In fact, some experts feel that the latest rate increases and tactics used by the credit card companies are poorly timed.
Credit card companies are also rankling consumers with the methods they use to notify cardholders of the increases. The report cites one method, in which the credit card companies disguise notices of interest rate increases as junk mail.
Travis Plunkett, legislative director for the Consumer Federation of America, told the Denver Post, “it seems like they're hurting the customers they need the most. What the industry needs most is trust, having lost it to the traps and tricks they've used for years, but they seem to be betraying it even further.”
Ben Woolsey of CreditCards.com said “The banks love nothing more for it to be thrown away.”
There are no laws about the way that banks can notify customers about interest rate hikes. And with the federal regulations on the way, banks and credit card companies are doing what they can to increase profits right now. Credit card companies say the new regulations will hinder their ability to make money.
The new laws set to go into place, the Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act, will ensure that consumers have more access to information. In addition, the act will ban abusive credit card practices, protects young consumers and bars unreasonable interest rate increases and fees. The act will also include monthly reports that show the consumer how much interest has been paid so far.