Banks Raise Credit Card Debt Costs Ahead Of Reform Deadline

[Jul 2, 2009.]

 

Banks Take Opportunity To Increase Credit Card Profits Before It's Too Late
Credit card reform may be in the sights of consumers, but for the time being, more credit card companies are taking their chances to increase profits while they still can.  In the previous month of May, credit card losses were at a record level of 10.6 percent; a 65 percent increase since 2008, and the highest rate seen since 1989. And according to recent data from Fitch Ratings, credit card losses were still at record levels of 10.44 percent in June. As a result, many big name banks and credit card companies have decided to pass the costs to consumers in hopes of recouping some of these losses.

Three of the six largest credit card issuers (Citi, Chase, BofA) have since decided to follow this move and increase the cost of credit recently. Most notably, according to Credit Suisse report, Citi has hiked interest rates on about 15 million U.S. credit card accounts--some rate increases reportedly going as high as 29.99 percent. One analyst from Credit Suisse expects APRs to continue to trend higher until the credit reform finally takes effect in February 2010.

Credit Card Issuers Cut Back On Other Perks
In addition to interest rate hikes, many other companies are cutting back on other services to recoup their losses. For instance, many creditors have resorted to cutting existing credit line limits; so while many consumers might be looking to reduce their debt, card issuers are now making sure of it. Other changes include higher minimum payments, increased fees on over-limit purchases, and more expensive cash-advances. Other creditors who offer reward points, or cashback incentives, are also cutting back--in some cases, cutting programs out entirely.

How Can You Consolidate Credit Card Debt?
One of the most common ways consumers typically consolidate credit debt is through a second mortgage or home equity line. For homeowners with enough equity, mortgage interest rates are vastly superior to credit card rates.  And as an added bonus, most appreciate the fact they are no longer under the mercy of these struggling creditors. Fortunately, with mortgage rates at their current levels, many homeowners will likely benefit from a traditional mortgage refinance, while simultaneously consolidating their debts into the new mortgage.

For more information on possible debt relief programs, a debt consolidation loan specialist can be found on this page here.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.