Hundreds of thousands of Capital One and Bank of America cardholders have been notified in recent months that their interest rates are going up -- in some cases to as much as 28% -- even though they haven't been missing payments.
Why, you ask? Silly! Because they can, of course.
David Robertson, publisher of an influential credit card trade publication called the Nilson Report, said a number of factors determine rates for plastic, not least the greater risk of delinquencies these days resulting from the credit crunch.
But he said it seems clear that leading banks, having suffered billions of dollars in losses from the mortgage meltdown, are casting about for new sources of revenue.
"They need to raise rates because they can't raise fees anymore," Robertson said. "It's politically untenable."
. . . .
"The card issuers are moving from a risk-management strategy to a revenue-generating strategy," he said.
"Credit cards are consistently the most profitable retail banking product," Robertson observed. "The growth is not there anymore. And with a recession coming down the pike, there's no expectation of more spending by consumers. The industry needs to raise prices to keep profits where they need to be.
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