Credit card rates continue to head north

Earlier this month, on January 6, this blog carried a story under the headline, “Credit card rates at record highs“. It reported not only the extraordinarily high interest rates that credit card companies are currently charging, but also the widely anticipated likelihood that they would continue to rise.

That message was reinforced Sunday by Jennifer Waters. Writing in The Wall Street Journal, she explained that, at the end of 2010, the spread (difference) between the prime rate and the average credit card APR was bigger than it had been for 20 years, and that when–as it pretty much inevitably must–the prime rate rises, it’s likely to drag credit card rates up with it.

And she made another telling point. Quoting the Synovate Mail Monitor, she said that all credit card offers sent out since the second quarter of last year had been for variable rate cards. So, unless you’re lucky enough to have an old, fixed-rate one, you should plan for higher rates–possibly quite soon.

Credit card regulation could cap rates

One congressman, Rep. Maurice Hinchey (D-NY), is unhappy at this prospect, and is preparing a bill that would see credit card rates capped at 15 percent. The Atlantic quoted from a statement he made:

Many hardworking Americans are using credit cards to make ends meet in this recovering economy, but credit card companies are finding new ways to squeeze the middle class despite significant reforms in the last Congress. Credit card companies are charging interest rates as high as 50 percent, trapping millions of Americans in a spiral of debt, forcing bankruptcies, and ruining peoples financial futures. We need to put an end to this legalized loan sharking.

The congressman may make a persuasive case (although an unintended consequence of the bill could be that desperate and uncreditworthy people could be denied essential financial lifelines), but, following the recent mid-terms, there seems likely to be little appetite in the House for another round of credit card regulation.

What to do if your rates are too high

There are plenty of people out there who are struggling to keep on top of their credit card debt, and who are finding the interest they’re paying on it to be a real burden. What can you do if you’re one of them?

Francine Huff, who writes for Index Credit Cards, last week had three suggestions for viewers of Fox Business. She recommended:

1. Call your credit card companies and ask for reductions. If the agent who takes your call says no, then ask to speak to a manager
2. Check out balance transfer credit cards. Some of these have really lengthy zero percent introductory APRs on transfers, and can provide a very worthwhile breather from interest payments
3. If neither of those works, explore your opportunities for consolidating all your credit card debt into a home equity line of credit

Published 01/25/11 (Modified 04/23/12)