Credit-Card Rates Keep Rising despite the Competition
Interest rates on credit-card balances are rising to their highest levels in more than ten years despite increased competition among credit-card issuers and efforts by the Federal Reserve to cut the cost of funds for banks.</br></br>According to Bank Rate Monitor, the national average for credit-card interest rates climbed to 18.94% as of Sept. 3 from 18.69% a year ago, while the rates that banks pay consumers on one-year certificates of deposit fell more than 200 basis points to 5.81%.</br></br>Although the higher rates are causing some cost-conscious consumers to pay back debt more quickly, banks overall are reaping one of their largest credit-card profit margins since 1982.</br></br>"The banks need to support their bottom line and they're doing it with wider spreads on credit cards," said Robert Heady, editor of Bank Rate Monitor, a North Palm Beach, Fla., newsletter that tracks bank interest rates.</br></br>Another reason for higher interest rates has been an increase in acquisitions of credit-card portfolios of banks that charged lower rates. The acquiring company then often raises the rates.