Yesterday we reported that total consumer credit card debt is now at an 8 year low. This week, Synovate, a market research company, released a report that suggests credit card interest rates are at the highest level in 9 years.
Last quarter, on average, the interest rates for existing cards was 14.7% compared to 13.1%, the average rate for last year. Average spending from credit cards increased by 6% within the first two quarters of this year to $1,559. For tips on how to lower your credit card interest rate, click here.
Why Such High Interest Rates?
The massive Credit CARD Act of 2009 placed enourmous restrictions on credit card companies and created an environment that will result in a decrease in revenue for credit card companies. This may seem like a win for consumers, but credit card companies, as shown in this data, have found ways to make up for that lost revenue — and raising interest rates on existing credit cards is only one of many ways — here are some more below:.
1. Raising Cash Advance Fees: A cash advance is when you take a “loan” from your credit limit – an advance of cash – cash advances are not recommended due to the high fees associated with cash advances.
2. Raising Balance Transfer Fees: A balance transfer is when you transfer debt from one card, to another card with (hopefully!) a lower interest rate – there is usually a fee associated with balance transfers.
According to a new study by Pew Health Group’s Safe Credit Card Project, credit card companies raised cash advance and balance transfer fees between July 2009 and March 2010: from 3% to 4%!
While the CARD Act has its benefits like requiring credit card companies to notify consumers 45 days in advance of rate increases and allowing consumers to opt in for over-the limit protection, credit card companies are here to make money and they intend to do just that. Don’t be surprised to see all kinds of new tactics instituted by credit card companies to increase their bottom line and not yours.
Use Cash!
If you’re tired of worrying about or thinking about what credit card companies are going to do next to screw consumers, use cash only! Leave your credit cards at home and cut them up (don’t close down the account – that will hurt your credit score).
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