Credit Card Rates Rise Ahead of Reform Law

AmEx declined to disclose how many customers had received the letters. Rates, AmEx spokeswoman Desiree Fish said, increased by an average of 4 percentage points for proprietary American Express cards and 2 percentage points for its "co-branded" cards -- cards offered in partnership with a specific company, such as Delta Airlines, Costco and Starwood Hotels.

New Rules Mean Losses for Credit Card Companies

The rules being implemented Thursday are the first phase of the new credit card regulations signed into law this past spring by the president. Most of the rules included in the legislation won't take effect until this February.

Experts say that even the few rules taking effect tomorrow will cost credit card companies money. One new card company requirement stipulates that card holders be given at least 45 days' notice before a rate hike. Such advance warning may allow some card holders enough time to pay off or at least pay down more of their balance before they're hit with a costlier, higher rate -- meaning less interest rate revenue for the card company.

Another rule requires companies to send bills at least 21 days before they're due. This, some say, could make it easier for consumers to pay on time and avoid late fees or pay off larger portions of their balances, thus shrinking their interest payments down the road.

It's unclear how much companies stand to lose from the law -- it's especially difficult to estimate that because card company losses are so steep already, said Peter Garuccio of the American Bankers Association.

The companies, he said, are being crunched by their own borrowing costs.

A major source of funding for the companies and banks that issue cards was once the securitization market, where banks packaged and sold off assets -- including credit card loans -- to investors. Today, that market is dry and "getting money from investors is a much more expensive proposition," he said.

In the meantime, there's no question that the card companies have been aggressive in trying to find ways to raise revenue, said Adam Levin, of the credit education site Credit.com.

Levin noted that American Express announced it was dropping its over-the-limit fees -- a move the card company made in response to the reforms governing such fees -- at the same time that it notified consumers of rate hikes.

"Even when they do something that looks like good PR move, they're doing something else (too)," he said. "You always have to keep your eye on the entire fee landscape. Just because one is altered doesn't mean they don't make it up with others."

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