Credit Card Rates on the Rise as New Regulations Bite
The average rate on existing credit cards hit 14.7% in the second quarter, compared with 13.1% a year earlier, The Wall Street Journal reported. The second quarter figure was the highest level since 2001.
The average rate is now 11.45 percentage points higher than the prime rate, the benchmark against which card rates are set. That's the largest difference in at least 22 years.
Rules implemented in 2009 made it harder for card issuers to raise rates on borrowers as soon they fell behind on payments. A new set of regulations that came into effect on Sunday also limit what banks can collect in penalty fees.
"The rules have changed and the goalposts of risk have changed," Paul Galant, CEO of Citigroup Inc's (C) Citi Cards unit, told The Wall Street Journal.