Why Your Credit Card Now Charges 30 Percent

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< http://news.newsmax.com/images/6957/trans.gif> < http://news.newsmax.com/images/6957/4387067674298.gif> Breaking News from MoneyNews.com Why Your Credit Card Now Charges 30 Percent The Federal Reserve keeps trimming interest rates. But credit card costs aresoaring. Some major banks are doubling their rates for credit cards to nearly 30percent — even for good customers. Experts tell MoneyNews that U.S. banks, wounded by subprime mortgage losses,are scrambling for ways to make new revenues, fast. Though Bank of America has been knocked in the business press for raisingrates, other brand names have done so as well, or may do so soon. "The stock price of B of A is driven by earnings,” Sanford Kahn, host of thecable TV series Ask the Economist, tells MoneyNews. "They, along with other banks, have had to write-off significant amounts insubprime mortgage loans. Raising their credit card rates is one way toincrease earnings to help offset the losses.” Overall, credit card interest rates vary quite widely. According to Bankrate.com, the average interest rate on a standard creditcard is 13.5 percent. Some banks, like Citibank, are reportedly chargingeven higher rates. "I was surprised to learn that one of my credit cards was at 30.89 percentand this was not the default rate,” says Adryenn Ashley, a financial advisorand author. "I hadn’t noticed that before. I’ve had the card for 10 years and have beena good and loyal customer,” she says. In addition to repairing their bruised bottom lines, the banks may also bein the process of building up reserves for possible losses on consumercredit cards, says Ben Woolsey, director of marketing and senior financialanalyst at CreditCards.com. Look for the higher interest rates to remain in place, indefinitely, eventhough growth in borrowing on credit cards was said to have peaked in 2007. "Higher credit card losses may be coming in the future,” Woolsey tellsMoneyNews, adding that increased unemployment could set off a wave of creditcard defaults. The increasing interest rates are not causing consumers to cut up theirhigh-interest credit cards just yet. But the changes are causing all kinds of chatter on consumer blogs on theInternet. "There is much being written on forums about consumer complaintsfrom affected B of A customers,” says Woolsey. "Something definitely isgoing on.” The U.S. Congress is also eyeing the matter. Rep. Carolyn Maloney (D-N.Y.)last week introduced a bill to restrict fees and rate changes that creditcard companies could impose on consumers. That may put an end to the practice, soon. "I suspect that credit cardcompanies will keep raising their rates — until Congress makes it harder forbanks to raise rates at will,” Nicole Boyson, a finance professor atNortheastern University tells MoneyNews. Boyson notes that B of A has also recently raised rates on ATM transactions. "Since they’re not getting a lot of new business, raising rates on existingcustomers can make up the shortfall,” says Boyson. Other fee increases can be seen at banks for overdrafts, and so-called"access charges,” for those who use their account too frequently, says AaronPatzer, CEO of Mint.com, an online personal financial management site. But you need not wait for Congress to legislate changes. "The proper response for outraged consumers is simply to take their businesselsewhere,” says Patzer.