Banks More Likely to Hike Credit Card Interest Rates...What are The Repercussions?

Credit card users have been enjoying relatively lower interest rates charged on balances but this scenario seems to changing. In February 2010, credit card interest rates averaged 13 percent reaching a record high of averagely 14.26 on February the same year. These high rates at that time where attributed to effects posed by the credit crisis. However, since then, banks have been cutting back their credit card interest rates on consumers.

In 2012, the average consumer credit card interest rate was recorded at about 12 percent and in 2012; it hit a low of about 11 percent. When consumers have low interest rates, it means they pay less on any balances they roll over. However, considering that card users have been paying their balance off and they are not carrying a lot of credit, it means that the amount paid as interest rates from credit card balances has reduced.

Credit card debt is still the leading indebtedness in the US and this shows that card use is high. However, there have been a few moves by banks to increase interest rates on credit card balances with the latest being the Danske Bank rate hikes. Danske Bank pushed up its interest rate on cards and this is an indication that consumers will have to tighten their belts to meet the extra cost.

The bank increased the rates by 2 percent and this means that the card users will have to prepare for tough times ahead. The use of credit cards in increasing and this is demonstrated by the proliferation of reward credit cards. There are virtually many different reward cards that cater for every consumer.

Although the top perks in rewards cards are enjoyed by high spenders, there have been low income reward cards, which also meet the needs of the low spender. As consumers seek for ways to cut down on expenses, perhaps the aspect of hiking interest rates on cards may not be received with good news. Danske Bank has not had any credit card rate adjustment for about four years and before the recent hike, this bank had two of the best value credit card ranking on the list of the top first three cards.

The bank’s name was recently changed from National Irish Bank to Danske Bank. At the end of 2012, another bank hiked its credit card interest rates by a margin of 4 percent. Bank of Ireland extended higher rates to its consumers at a time when consumers do a lot of shopping in holiday season.

In a similarly move, MBNA increased its credit card rates last summer in 2012 by the same margin of 4 percent. What this means is that soon other banks may fall suit and also increase their rates. Consumers are still ailing from the effects of recession and perhaps an increase in rates could create more pressure on their spending patterns.

For those carrying balances on their cards, such an increase could lead to more troubles. If any delinquencies occur, the credit card interest rates could hit very high levels that users cannot cope with. Despite these projected increase in card rates, the use of credit cards in expected to grow in 2013.