The interest rates charged on credit cards have recently reached a 13-year high. Since legislation has changed the rules about how interest can be charged, card companies are raising the base rates to make up lost ground. It is working, as credit card companies are also posting high revenues.
Legislation leads to higher rates on credit cards
The interest rates on credit cards is reaching a 13-year high, according to CNN. The current average interest rate for credit cards is 14.72 percent. However, the interest rate charged to a customer varies between card issuers and also can depend on credit scores. People with poor credit ratings can be charged interest rates in excess of 50 percent. The average APR on credit cards has been rising over the past two years, as the recession ate into card company and bank profits. On top of consumers being less willing to add to their debt, Congress passed the CARD Act, which prevents credit card companies from raising interest rates after a customer signs an agreement or without due notice. However, the major card issuers won’t be running for emergency loans anytime soon.
Card companies post huge earnings
Despite rising rates giving the impression that it is harder for credit card companies to earn a living, recent earnings statements show that is certainly not the case. Visa, according to the New York Times, recently posted an earnings report stating the company had increased profits by 16 percent, a profit of $2.24 billion, in the most recent quarter. MasterCard, according to the Wall Street Journal, managed to post a 41 percent increase in profits by the end of the most recent quarter.
Harder to get a credit card
Though card issuers certainly want more people to get credit cards, the interest rates may make it prohibitive to people who have less than stellar credit. Having to take out installment loans to pay for a weekend trip from Jackson to Birmingham is not a thrilling prospect for many people.