The interest rates on cards have gone up this week as rates on Chase and Cap One have increased following a hike in interest rates on new credit cards. The APR or the annual percentage rate has risen to 14.37% as per the weekly reports from CreditCards.com. This has been the highest rate since the beginning of August. The APR's seem to have increased in 3 out of 4 weeks. The recent hike seems to have been driven by Cap One as it hiked the annual percentage rates on new cards such as the No Hassle cash rewards card (for those who have an excellent credit rating), followed by Chase that has increased its rates on the Marriott Rewards Visa Signature card. While Cap One has refused to comment on the issue, Chase has owed the change in pricing to various factors such as the new adjustments that were essential for the company as well as its clients.
While the Bank of America has exited from colleges and thereby exiting the student as well as the alumni groups with respect to the Platinum Plus MasterCard (Ohio State University), the other moves by the bank are not just limited to the increase in APR's. The exit by the Bank of America is due to the Credit Card Act, 2009, that has put restrictions on the lending to students and alumni groups, and as per the card agreements between colleges and banks there has been a demand for more transparency as per the Act.
Ever since the delinquencies declined sharply banks seem to have increased their lending as there is more likelihood of credit card bills being paid in the future. However, the borrowers would be paying much more than before. For instance, if someone had borrowed $5,000 and paid $150 consistently, they would end up paying $6,420 as per the prevailing rates. This is a hike of $186 which is much more than what one would have paid in January, 2010, when the APR was at 12.97%.
The recession in the economy the previous year had left many card holders unable to pay off their debts. But now with the increased rates as well as tightened standards with regard to the lending, banks have ensured that they are well guarded against any turbulence in the future. Bank of America claims that it is not only adapting to the new regulations but it is certain that it would improve its credit quality while building capital as well as managing risk better in the future.