There has been an increase in the average rates of interests on credit cards followed by the rise in rates at Chase and Capital One. The current national annual percentage rate has risen to 14.37 percent, which is the highest level touched by national interest rates since the early part of August. However, it also represents a pattern of increasing interest rates, which rose in the last 3 out of 4 weeks. The latest of the increases in the average were due to the recent hikes at Capital One which has increased interest rates for new applicants of the No Hassle Cash Rewards card for customers with very good credit rating. Another contributor was Chase, which increased its interests on the Mariott Rewards Visa Signature card. According to Chase, the changes were largely driven as an adjustment to numerous factors depending upon what would suit both the company as well as the customers.
However, changes witnessed in recent times were not all about credit card APR hikes. Bank of America proceeded to quit the alumni and student credit card market by getting rid of the WorldPoints Platinum Plus offer with MasterCard for the Alumni Association of Ohio State University. This exit seems to be driven largely by new rules in the CARD Act that seem to limit lending to students and demands greater transparency between card issuers and the schools. Bank of America though has extended its lending activity in other areas increasing the total amount to 173 billion dollars during the 3rd quarter. This also includes a 3 billion dollar lending in the small business card segment.
Meanwhile there is an increase in the lending by banks as more and more borrowers seeming to be paying back their bills. There is a decline in the charge offs and delinquencies. However, one cannot assume that banks are lending money at discounts. In fact, the interest paid by a credit card customer on a given amount is more than what the customers would have paid at the beginning of the year. This is because in January the APR average in the country was 12.97 percent.
Interestingly, banks have increased the interest rates and also tightened the standards by lending money to borrowers in order to save themselves from future disturbance in the economy. The quality of the credit is improving though even as credit cards are trying to adapt to regulatory environment.