Credit Card Rates: Banks Plan To RAISE Rates, Annual Fees

WASHINGTON — Banks expect to tighten terms on credit cards in response to a new law that aims to protect consumers from sudden rate hikes, the Federal Reserve said Monday.

A quarterly survey by the Fed found that many banks expect to increase rates, reduce credit limits and raise annual fees for both prime borrowers – those with sound credit histories _as well as more risky "non-prime" borrowers, who have tarnished credit. Banks also expected to raise minimum credit scores for non-prime borrowers, the Fed said.

Banks already have been pushing through rate increases in anticipation of the new rules. Because of that, the House recently approved legislation to speed up the law's effective date and have the provisions take effect immediately, although prospects are dim for Senate passage.

Most of the new credit card provisions are slated to take effect on Feb. 22.

Many people and businesses are still having trouble obtaining loans, a force that is likely to restrain the economic recovery.

It's a delicate dance for policymakers in Washington. They want banks to boost lending, but no one wants a return to the lax standards that many blame for contributing to the worst financial crisis since the 1930s.

The Fed's survey also found that nearly 26 percent of banks said they tightened standards over the past three months on home mortgages for prime borrowers. That was up slightly from almost 22 percent in the survey released in August, but is significantly below the peak of about 75 percent that reported tightening standards for such loans in July 2008.

For the third straight quarter, banks reported that demand for such loans grew, the Fed said.

Just over 30 percent of banks reported tightening standards on nontraditional mortgages, such as adjustable-rate loans with multiple-payment options. That's down from nearly 46 percent in the previous survey.

Information about what impact the new credit card law will have on banks came from a special one-time question in the new survey.

Banks, in another special question, said they were extending commercial real-estate loans more often than refinancing them. They cited lower originations and decreased draw on revolving credit lines as main reasons for a decline in commercial and industrial loans this year.

Commercial and industrial loans fell to $1.37 trillion at the end of October, from $1.48 trillion in July, according to a separate Fed report. Commercial real-estate loans dropped to $1.66 trillion, from $1.69 trillion in July. Consumer loans fell to $847 billion, from $852 billion.

Comments

[InMyOwnWay]

No surprise here. The fear that must be rampant in the board rooms and executive meeting rooms of these banks! Imagine! "There go our profits!" "They already took our bonuses!" Of course, they can't grasp that if they don't lend, they don't profit. They're acting like they're on life support, sucking all they can out of those who choose to not delay gratification. The end of the monoliths is near! Small banks, local banks, neighborhood banks, credit unions, will come out of this much better to serve the country.

[Corners]

I can post the letter i got, minus personal info. It would be amusing if i wasn't getting robed. We could get better rates getting loans from a loan shark then banks. If the government is lending them money at virtually 0% and they are backed by OUR TAX DOLLARS then how they heck can they justify 30% on an account that is clearly not at risk of default. Tax payers already paid for YOUR MISTAKES and now you rob us so you can keep your profits up.

Every other business gives itself haircutz. Can you imagine if a 20% haircut you got for years suddenly went up to $80 and the reasoning behind it was because the owner had a bad gambling problem and was really bad at it.

[Corners]

I had a late payment in april on citi card. How late? 1 day. Needless to say rate went up to 20%. Other then that 1 day late i always paid on time for the last 6 years. So they drop my rate to 7%. Get this, i get a letter in the mail 1 week later dated ONE day after they dropped my rate now telling me my rate will now be 29.99% and i can keep my card and they will "do me a favor as a loyal customer" and offered me 24.99% as if it was a great gift or something. So my choices are to get raped on my debt, or close my account and take a hit on my credit score.

When barney Frank or any politician says when they enacted the new credit card laws this summer and gave them 9 months before those protections and laws went into effect that " We didn't think they would use the time to raise rates" .... Really? What a bunch of bs. A 4th grader could have predicated this.And now 2 months before it goes into effect now you wana freeze rates till laws go into effect? Whats the point? They already raised most ccholder rates across most banks. Stop pretending you are trying to protect us. Stop making it look like you are here to rescue us from the big bad banks. You sleep in the same bed.

[ron071]

When will the majority wake up to the trickery of the Republican Party???????

[blindhog]

Another aspect of credit card fraud is how seemingly illogical large purchases and charges appear on credit card bills of relatives who lived alone and have died.

In most cases the living relatives can't track these charges and the estate is force to pay for them as well as the interest that may have accured.

[gallimaufry03]

Okay, coining a new word: Bankgress.

[lvdragonlady]

America, get even with the banks and cut up your credit cards and tell the bank to take a flying leap.
They deserve it and we do not have to accept their terms.

[BernankeMadoff3]

Economy is rigged against middle & lower class

good articles: http://financeopinionss.blogspot.com

health care reform is good, but we also need better financial reform. no more bailouts

[christimarie]

Of course, the prospects are dim in the Senate for a bill that would help average Americans. There are still too many Republicans in the Senate who think it is an abomination to help anyone with assets less than $10 million. The public be damned. The rest of us are just there to serve these pompous @$$es. Senator Phil Graham was key to having bank regulations removed so that his buddies could get richer and richer. The Bush administration just ate it up. Nothing will change until these Republicans are way outnumbered. The sad part is that they have fooled so many of their followers. I was a Republican for 35 years, but the Bush administration and his giving away of US jobs, and the deregulation of the banks woke me up. I wish the rest of the fools would open their eyes. If you are an average, not wealthy, Republican, you are being fooled. You are just being lied to and used to make the rich richer. The far left has their agendas also. When, oh when, will there be a party for the average working class American that really gives a rip about them?

[ron071]

How can so many Americans be fooled by the Republican Party for so long? So few have fooled so many for so long? They must be very smart or the majority so stupid. Your choice is to wake up to what is being done to you. The Blue Dogs are Republicans in disguise and have stolen the majority we thought we elected. This is the cruelest hoax of all.

[Free2BeMe]

You are so right! I believe the main reasons for this sad state of affairs to be:

Apathy
Corporate Media (aka MSM)
Resistance to change
Naivete
Complacence (I've got mine, so who cares about you)

Please fill free to add to list

[ImaLibDem]

Nothing for me was more angering than receiving my harassment phone calls on a credit card payment from "Doris" in India. I couldn't understand a thing she was saying and told her so. I asked her, "Are you in India?", She said yes and, "I will take your payment now". I told "Doris", tell Chase if they want to talk about it to have someone call me who is in the U.S. and then she hung up on me. The gall.,

Folks, America is on a raft going down a raging river, getting closer to the rocky bottom of the falls. We were all taught to pay our bills and court society's approval. Our reward of merit became a credit score. Now the threat of it being reduced doesn't matter anymore, given that life, liberty, justice and protection under the law have been sold to India.

[vippy]

I called TXU, the Texas Energy Provider, and was connected with someone in the Phillippines.
Of course, there is a language problem though they try hard to have an American Name. They are but bots, with certain phrases to repeat over and over and make no sense whatsoever. I wonder why our companies, who rake in billions, need to put their customer service offices into a foreign country? I wish we had some competition in this country so we could choose, however, the big companies are buying up the others and there goes the competition. There should be a law against that. Perhaps it would be a good idea to get a 3rd world country CEO, who only makes about 1/10th of that of our CEOs then it would be fair!

[gallimaufry03]

I work for a company whose internal help desk for computer-type issues was moved to India several years ago. It was just unspeakably bad. I'm sure they're very nice people but they have a script they go by and don't deviate from and can't just call up one of their pals to come to my desk to find out why the CD drive won't open. As for the accents, maybe it wasn't their mouths but my ears.

At any rate, communication was such that if anything on my computer needed servicing I'd call anyone I knew who knew anything at all about Dells and plead with them to come look at it for me. (This rarely worked.)

In the end, enough people complained that the systems people got their own help desk located in the same building. They got so many positive reviews that they eventually got the whole shebang. Voila! Now we have an all-American help desk right here in the same building.

COMPLAIN about customer service you cannot understand. Complain often and in writing. It can't hurt.

[TradeLosses]

Lets all pray that the health care bill doesn't get stonewalled in the Senate...

good articles; http://financeopinions.blogspot.com

This is just one step in a staircase of much needed reforms after 8 years of destruction.

[ZSV]

I declared bankruptcy and freed myself from credit slavery. My home sits there empty, (they are still trying to collect taxes on it from me 2 years after my discharge, I guess banks don't have to pay taxes on houses just us), my car was voluntarily surrendered, they can have it all and I suggest you do the same. Even in a crappy economy you can do fine without credit. It's time for everyone to grab these too big to fail banks and show them that we hold all the cards (pun intended), grab them by the balls and stop paying them. That's what I did and it's totally worth it. A credit score is just a number...to hell with it.

[gallimaufry03]

While I agree with the upshot of your sentiment ... where do you live and how do you get around? It's one thing to fight for what's good and right and just and fair and all that.

But people still need to live in places that are reasonably safe and mostly (if not entirely) bug free. And people still need some mode of transportation ... particularly family-type people.

Being "free" is great ... but practicality is important too. Yanno?

[HotheadPaisen]

wow- that never occured to me. DO the banks that have 'reclaimed' all these properties pay the taxes on them?

[jdw1981]

Obama's economic recovery rolls on...

[JoeBlough]

It's all uphill trying to recover from the horror of the Bush/Cheney Admin.

[vippy]

We wished it was uphill but it does not look like it. Or do you think our leaders trying to make the banking regulations more opaque so we don't see their shortcomings is good for us? You think that the huge bonuses they get this year over last year is progress?
Frankly, I don't see where we are going anywhere. In fact, 65% of us will need government assistance by 2012. We need jobs and we need a liveable wage like the Europeans have in order to move on. Why do we need this huge defense budget to bully the world and then have nothing for the people. Are you proud to be an American still?

[ron071]

It is a continuing surprise to me that any middle class American can possibly still be a Republican when they have been sold out time and time again by the party which works for the rich and large corporations. Amazing that this ignorance prevails and is supported by divisive racial , religious and gender politics. Folks who don't know who supports their interests don't deserve any better. The current health care " debate" is only the latest example of how the public interest is subordinate to the interests of the wealthy, and the large corporations. Whittle away more and more as the " debate" goes on. The interests of the American people are clearly at the bottom of the congressional agenda. Our money is being used to fuel the lobbying campaigns by the corporate interests. How absurd is this " democracy " of ours when the people's interests are at the bottom of the heap. Will the average American EVER WAKE UP ?

[Festival]

I don't care what the banks are carrying on their books as "Accounts Receivable" in terms of credit card money-owed. They will never collect. There was 8 years of jobs lost in the US under Bush; the jobs offshored are not coming back and are not being replaced. Also good news is that the banks are not going to collect in India or China. In the US, on average one consumer has five credit cards. In India, the ration is six consumers have one credit card. In China, the ration is 60 consumers to one credit card, so the banks have to max whatever Accounts Receivable in the US.

Why the banksters didn't listen to the job loss under Bush, I have no idea. I've thought about starting a business where I teach consumers to talk back to harassing telephone calls from collections agencies.

[knowhelpnow]

There was a time when the people of the USA were treated well. What happened.

[Citizen54]

We stopped paying attention to the transfer of power to Big Business.
We keep electing people who are not interested in representing us.
We vote on ideological lines ("pro-life," etc) instead of in our own economic interest.
We believe we too someday will be a billionaire.
We pay more attention to American Idol and Monday Night Football than we pay to government.
We are overworked and tired.
We allow a government that works against the common man.

[gallimaufry03]

fanned ... excellent

[HotheadPaisen]

"Greed" became "Good", as opposed to being one of the deadly sins.