Many readers have complained of credit card issuers raising interest rates on their cards, even if the customer has pristine credit and never or rarely carries a balance. Now we are finally seeing some efforts to see how significant this is across all card users.
A Rasmussen survey puts the total at 50% of all respondents. Now one can argue, correctly, that banks were too profligate in handing out credit, and some sort of reversal is in order. Yes, but the nature of the banks’ action here is pretty sus. And consumers agree. 77% say banks take unfair advantage (note the wording, not just advantage, but “unfair advantage”) of customers.
First, if the issue was primarily giving too much credit to the wrong people, the first move is to cut back credit to them. There were reports on that activity, but the moves to jack up rates appear to be far more extensive than those to restrict credit (I am still getting offers for new credit cards and both attractively priced and some not so hot balance transfer offers. One from Citigroup was a 3% balance transfer fee and a 1.99% rate for a full year).
More important, these increases appear to be indiscriminate, across broad swathes of customers, and in anticipation of legislation that will restrict their ability to raise rates.
Now I know some readers will argue that people should not use credit cards for borrowings at all. But things are far from black and white. First, credit cards are a very important source of credit for small businesses (indeed, they are an important type of startup funding). Some important issuers who targeted that market, namely American Express and Advanta, have withdrawn completely. Businesses at all levels of the food chain routinely borrow to fund operations and buffer fluctuations in cash inflows and outflows. Second, there is an element of bad faith dealing here. The banks were given TARP funds and other, extensive types of support so they could support the economy via lending. Raising rates to beat the impact of new rules was predictable (the long lead time for implementation of the rules was no accident) but the brazenness of the banks is still remarkable.
Fifty percent (50%) of Americans say interest rates on their credit cards have been raised in the past six months, as Congress seeks to limit the ability of banks to raise those rates.
A new Rasmussen Reports national telephone survey finds that just 31% say the interest rates have not been raised on any of their credit cards in that period. Nineteen percent (19%) aren’t sure.
Sixty-nine percent (69%) of adults say an increase in the interest rate on a credit card makes them less likely to use that card. Twenty-five percent (25%) disagree and say they are not less likely to use a credit card after the interest rate has been raised.
But then 51% of adults say they pay their credit cards in full each month, thereby avoiding any interest payments. However, nearly as many (45%) say they sometimes carry a balance on their cards.
Yves here. The interesting bit is that if consumers follow through with their intentions, some consumers who never carry balances will shift their purchases away from a credit card company that raises rates, maybe out of general principle (or perhaps a view that if the company behaves badly on this front, it may not be accommodating on other fronts, like dealing with billing disputes). Back to the report:
In May of this year, nearly one-out-of-four Americans said they were at least somewhat likely to miss a credit card payment in the next six months
Only 16% say they are carrying more credit card debt than they did a year ago. That’s down five points from December of last year. Thirty-four percent (34%) say they have less credit card debt now, and 46% say their level of debt is about the same.
Twenty-six percent (26%) say they do not know the interest rate their pay on their primary credit card. Sixty-one percent (61%) say they do know that interest rate, but 13% are not sure…
Fifty-seven percent (57%) of Americans say there is a need for more government oversight of the credit card industry…
Twenty-four percent (24%) of Americans say they personally need to cut back on their use of credit cards and other borrowing anyway.