It’s not often that you get an insert in your credit card statement that says, “Congratulations, we’re lowering your interest rate.” Typically, it’s the opposite. In fact, from 2008 to 2009, the average interest rates on credit cards increased from 13.57% to 14.31%. Most consumers blamed the increase on the new credit card reform laws. This too is incorrect. The interest rate increases were in direct correlation with what was happening in the economy. But, finally, consumers are in line for a little good news, which is that credit card companies are reducing some credit card interest rates.
Millions of Americans will benefit from reduced credit card rates with issuers such as Bank of America, JPMorgan Chase, Citigroup, Capital One and Discover. All of these credit card companies are planning to reduce rates for some of their customers. This is a result of the new credit card reform rules, which state that there should be reviews every six months to see if the cardholder is due a rate decrease.
Millions of Americans experienced rate increases on their credit cards when the economy was in trouble. Now that things are starting to stabilize and rates are starting to decline, it is unclear how many cardholders will be affected by the change. Part of the reason is that many cardholders have recently closed their accounts or had them closed by the issuer. About 8 million card holders that had a card in 2010 no longer have the card today.
It is estimated that millions of card holders will experience the rate decline. The second largest issuer of credit cards, Bank of America, is expected to reduce the interest rate on 1 million credit card accounts, which is about 2% of its credit card accounts. The remaining major credit card issuers — Citigroup, JPMorgan Chase, Capital One and Discover — are staying tight-lipped on how many of each of their account holders will get the good news that their rates are decreasing. If you apply the same ratio of Bank of America customers across the board, however, approximately 10.5 million credit card customers will see their interest rate on their credit cards go down, according to The Associated Press.
So, what is propelling credit card companies to make these changes? It is the credit card reform, but whether or not your card will be affected depends. While the law does state that banks have to review the credit card rates, it also stipulates that if the credit card rate was increased because of credit risk or economic conditions, the bank has the right to take these factors into consideration when reviewing the accounts every six months. In other words, if your credit score has declined or you are late in making payments on your card, then you are unlikely to see a lower rate.