It’s no coincidence that the credit-card interest rate raising and credit card canceling orgies are happening at the same time, reports the New Yorker:
That’s why credit-card companies have had to rein in their lending and shed accounts. Since that risks shrinking profits, they’re also trying to get as much as they can out of their existing customers, by doing things like sharply increasing their interest rates.
Wait till Rick Santelli hears about this one!
I don’t agree with this part though:
Many cardholders don’t have enough money to pay off their balance in full, so when interest rates rise they aren’t able to just close their account and get a different card. Many cardholders don’t have enough money to pay off their balance in full, so when interest rates rise they aren’t able to just close their account and get a different card. Effectively, they’re captive customers.
Hasn’t the New Yorker ever heard of balance transfers, where you get a card with a different company and transfer the balance over? Obviously that’s a lot harder with companies holding back on new lines of credit, but not everyone who can’t pay off their balance in full is “captive” to a new higher interest rate.
Also, as commenter wickedpixel points out, you can refuse the terms of the new higher interest rate. While this means your card is canceled and you lose access to the credit line, you’re not “captive” to the rate either.