Banks Race to Raise Rates on Credit Cards
Banks anticipate losses of $50 billion when new credit card rules take effect.
Jan. 4, 2010— -- Consumer advocates say the race is on, as banks and credit card companies look for ways to make up the estimated $50 billion they're about to lose when new credit card rules take effect.
But now, in many cases, those advocates say, the banks are targeting consumers' credit cards to make up their losses.
"The wholesale raising of interest rates, I've seen 12, 15 percent," said Adam Levin of the credit education site Credit.com. "There's no questions they were front-running the laws."
Along with higher rates and new fees, one bank is even charging for a monthly paper statement.
ABC News called several banks today for comment, but received only emailed responses.
"We understand that customers don't like price increases, especially in difficult economic times," a spokesperson for Citi wrote. "However, these actions are necessary given customers not paying back their loans and regulatory changes."
Bank of America said in an email that it was not raising rates, "unless the account is late on two or more payments" within any 12 months.
The American Bankers Association said customers are getting a fair warning before any interest rate hikes on their current credit cards.
"Consumers must get a 45-day advance notice, which gives them lots of time to find another card and to have the option to the decline the increase," American Bankers Association vice president Nessa Feddis said.
But if consumers decline that rate hike, in many cases, they can be dropped.
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