To understand how the collapse of the nation's real estate market is hitting borrowers of all kinds, consider Carson Moore.
Moore, of Elkton, Ky., says he always pays more than the minimum due on his credit cards, and does it on time, every time. But in January, Bank of America told him it was nearly tripling his interest rate, to 22%.
"I don't know why they did it, but I'm not very happy about it," says Moore, 60. "It's not like I miss payments or anything."
Bank of America bacsays it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say.
"Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
By raising rates and fees — but not boosting them so high that they push borrowers into default — lenders are seeking a "delicate financial balance," says Robert Manning, a finance professor at Rochester Institute of Technology. "They can't squeeze too hard that they're going to kill their client. But they have to squeeze more revenue out of their current portfolios."
Even as the Federal Reserve has aggressively slashed short-term interest rates, banks are raising rates on some credit cards. They're also boosting late fees, lifting caps on balance-transfer fees and raising ATM fees for other banks' customers.
Bank fees have been rising for years. But as their loan losses have surged, banks have become quicker to raise certain fees and rates, analysts say. Lenders collected a record $18.1 billion in penalty fees last year just on credit cards — up 69% from 2003 — from such customer missteps as paying late or exceeding a credit limit, according to R.K. Hammer, a consulting firm. The fees are likely to rise an additional 5.5% this year, Hammer says, because of late fees as people struggle to pay bills.
"I would expect banks to raise fees on a variety of services to offset some of the losses," says Richard Bove, a financial services analyst at Punk Ziegel. "They're going to start to nickel-and-dime you to build non-interest revenue."
Escalating fees and rate increases come at a politically explosive time. Congress has held hearings on whether banks need tighter regulation given the increasingly broad range of credit-card fees and policies — such as deadlines in the middle of a day for receiving payments — that have tripped up consumers.
Ahead of those hearings, companies vowed to scale back some of their fees and punitive practices. Chase, for instance, announced then that it'd stop raising card rates on customers whose credit scores had dropped, and Citigroup said it would no longer raise rates if customers paid late to other creditors.
But Bill Hardekopf, CEO of LowCards.com, a card-comparison site, says he fears that "amid Congress' preoccupation with fears about the economy, the ramp-up in fees and punishing practices by consumer lenders will go unchecked."