National APRs' Little Increase changes nothing

Just recently, shocking news about the country's overall annual percentage rate hike was revealed. However, it has slightly gone down in a week after several banks decided to stop increasing additional rates temporarily.

The Weekly credit card Rate Report revealed that the national annual percentage rate on new credit card offers gone down to a 12.60 percent rate. This has been the first in the continuous rise of APRs in the past three weeks. However, this value was caused by the addition of cards in the data base that produced such reading and not really from the decrease in APRs from major credit card providers.

Bank of America was one of the very few banks which made a pledge to not increase credit card rates until February 2010. However, several other credit card issuers have already followed suit. Discover and Capital One has also decided to cut back on increasing APRs on their new credit card offers.

However still, banks and credit card companies can not make a promise to stop increasing their interest rates and other fees. Even those that have already made a pledge like Bank of America, are sill on their way to creating changes in their terms and conditions. BofA has released a statement this week that beginning next year it would start collecting annual fees from several of its credit cards.

Increasing the annual percentage rate or the percentage given to credit card holders on how much it would cost them to get a credit card is not the only action credit cards have chosen to protect their profit before the new credit card law takes full effect on 2010. Some urgently increased their interest rates and fees for late payments. Others have chosen to cut down the credit limit on some credit cards. While some, like the Bank of America, have decided to implement additional annual fees.

Such are reactions to the stricter rules stated on the new law which were created to protect the consumers. However, many analysts believe that for the time being, the public has lost credit access.

Michael Rubin, author of "Beyond Paycheck to Paycheck says, "Banks had been raising rates amid an economic and regulatory environment that has become increasingly challenging. At the end of the day, they've got to match their risk with their portfolio." He adds that if the people can no longer bear the interest hikes, credit card providers would choose other options like introducing additional fees.

Meanwhile, the Federal Reserve is keeping its hands off national APRs. The Fed can influence the change in annual percentage rate by changing its key lending rate, called the federal funds rate. The variable rates of credit cards are tied to the prime rate which fluctuates according to the federal funds rate.

According to Donald Kohn, Federal Reserve Vice Chairman, they have anticipated that the inflation would have to be subdued from some time and the only way to do that is to raise the federal funds rate. He also says that there is more risk involved in the current economic decline than there is in inflation. He notes that the banks can leave the APRs on their credit cards unchanged for the time being. He thinks that they have done what they had to do for the moment.