Ask Money

Credit cards interest rates

Chris Farrell Feb 24, 2010

Question: I’ve had an account with “Capital One” for a very long time (it must be around 10 years). Never had a late payment, never went anywhere close to my credit limit, always paid well over the minimum payment and never had a check bounce. About 4 months ago my finance charge was increased 127%. I called spoke with a supervisor. After a very long and frustrating call, it came down to “it’s the economy, you see your other cards will go up as well”. No remorse, my past history didn’t qualify for a lower rate. I’m not unreasonable. I know the shape of the economy and would understand (wouldn’t like it) 10%, 20%, 50% BUT 127% INCREASE!!!!!!. What’s the increase on individuals with a less than stellar record (4000% increase)? Any help/suggestion would be greatly appreciated. Awaiting your reply. Enzo, Plantation, FL

Answer: The quick answer is, Get used to it. The major credit card issuers that in the not so distant past bombarded many customers with extra cards and hefty lines of credit are equally eager to get rid of some customers and gouge the remaining as much as possible. Credit card companies like to whine that new government regulations are forcing them to raise interest rates, hike fees, and cut lines of credit. The main reason for the change is that their basic business model is broken. Their balance sheets are full of bad debts and their profits are anemic. You can learn all about credit cards and the new government regulations that went into effect on February 22 by listening to this recent Marketplace Money show,

What can you do? In the short run I would shop around for a better deal. Check out the credit cards at local credit unions, community banks, and online banks. Longer-term, I wouldn’t carry a balance on your credit card so that interest charges won’t matter to you. All you need then is to find a no-fee or low-fee credit card.

I do think that with time the credit card industry will decide mistreating customers is bad for business. But I don’t expect the change in perspective anytime soon.

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