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Credit Card Companies Could Be Hurting Themselves with Interest Rate Increases

This certainly is an ironic twist but I can’t help but wondering if credit card companies are raising the interest rates on cardholders are actually hurting themselves in the process. It sounds like a bit of an oxymoron, I know.

After all, raising interest rates will mean more revenue for the credit card issuers, won’t it? Well, not necessarily. There is a bit of a paradox working here and only time will tell to see how it all plays out. Let me explain.

Millions of Americans carry credit card balances from month to month and are just getting by as far as paying their bills go. By raising interest rates it could very well be the tipping point that now makes those bills unaffordable.

If that happens some people are going to go into default and stop making payments while others are going to declare bankruptcy. It is indeed a slippery slope that the credit card companies navigate. It’s a question of how much is too much.

This post is in response to the millions of letters that have gone out to credit card holders notifying them that their interest rates are going to be raised. It is in response to the new federal regulations aimed at reforming the credit card industry.

In the past the justification for raising interest rates has come from either the cardholder failing to make their payments on time or the Federal Reserve raising the prime rate.

In addition to higher rates the credit card companies are also lowering the lines of credit for many cardholders. That is understandable in light of the record number of defaults and bankruptcies.

But I really have my doubts about how smart it is to raise interest rates on people they can hardly afford what they are paying now. Only time will tell of course, but I think this move may just bite them on the butt.

Related Information:

  1. Credit Card Interest Rate Increases to Be Looked at by Regulators The feds are now taking a look at how credit card issuers are aggressively raising interest rates on existing balances….
  2. How to Deal with Sudden Credit Card Interest Rate Increases If you are one of the millions of Americans who have recently seen your credit card interest rates increase sharply then you can at least take comfort in the fact…
  3. Federal Reserve Asked to Look into Credit Card Interest Rate Increases Reuters ran a story last week that reported that Senate Banking Committee chairman Senator Chris Dodd (D-Connecticut) drafted a letter to Federal Reserve Chairman Ben Bernanke and other regulators requesting…
  4. Credit Card Interest Rate Secrets Exposed We expose several credit card interest rate secrets that the issuers simply do not want you to know….