The national APR average was raised to a high of 14.37% this week due to a jump by The Bank on its Cash Rewards card and an increase by Chase Bank on its Mariott Rewards Visa.
These credit cards are for customers with extraordinary credit. It is the highest national average since the beginning of August. The increase is true to the latest trend which has shown rates increasing in 3 out of the last 4 weeks. Chase said these changes were due to several factors. They adjust their interest rates whenever it is deemed appropriate for their customers and for the company itself.
These are not the only shifts being seen in the credit card industry lately. Bank of America is following through with its exit plan from the student credit card market. They have eliminated the Ohio State University Alumni Association WorldPoints Platinum Plus Mastercard offer.
They indicate this is due to the Credit Card Act of 2009. That act was designed to make credit card rates and terms much easier for students to understand and help eliminate the overwhelming amounts of debt and credit defaults among young students who may not fully understand credit cards.
However, Bank of America is still going strong in the rest of the credit card industry. Their customers used around $173 billion in credit during the 3rd quarter of 2010. They have also extended $3 billion in credit to the domestic consumer and small business card markets.
Since delinquencies have slowed and the borrowers appear more likely to be able to repay their loans and credit cards, the bank should be able to continue to lend even more in the coming months. But, as we can see with the rate hikes, consumers will pay much more for that credit than they might have earlier this year.
Moody’s Investors Service reported they expect the trends of lower charge off rates to continue. They indicate they could be another 10-15% lower by the beginning of 2011. This is good news for banks and for the rest of the economy, but don’t expect to see a decrease in interest rates any time soon.
These rate increases are coming on the heels of the 3rd quarter reports that have indicated fewer delinquencies, meaning less anticipated charge offs. However, since the rate of improving delinquencies is slowing, banks are still taking measures to protect themselves while their markets are slowly making a positive turn.
Banks are also looking to protect themselves from any future trouble in the market that could be forthcoming. Nobody wants to see another increase in losses, so banks are raising rates and tightening lending standards in order to keep themselves in safer markets. Bank of American has indicated they are adapting to the new changes in legislation.
They have indicated the quality of borrowers has continued to improve and they are managing their risk and capital. However, they are remaining realistic about upcoming challenges in the short run, and hopeful about the opportunities in the long run.