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As credit card companies adjust to new portions of the sweeping law which took affect last weekend, they are passing higher borrowing rates on to many of the 381 million U.S. credit card accounts. Given the fragile state of our economy, Congress should help consumers instead of enacting burdensome rules that ultimately hurt the American public.
Ruth Simon of the Wall Street Journal predicts average rates will continue to climb even higher:
“New credit-card rules that took effect Sunday limit banks' ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers' ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.The Credit Card Act is just another example of the Democrats in Congress forcing their will on the American people regardless of its negative effects on our struggling economy.
“In the second quarter, the average interest rate on existing cards reached 14.7%, up from 13.1% a year earlier, according to research firm Synovate, a unit of Aegis Group PLC. That was the highest level since 2001.
“Those figures look especially stark when measuring the gap between the prime rate—the benchmark against which card rates are set—and average credit-card rates. The current difference of 11.45 percentage points is the largest in at least 22 years, Synovate estimates.
“By comparison, the spread between 10-year Treasurys and a standard 30-year fixed-rate mortgage is just 1.93 percentage points, near historical averages, according to mortgage-data provider HSH Associates.”
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