You're a Responsible Borrower? 'So What?' Say Credit Card Banks

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banks and borrowers paying billsLately, the banks that issue credit cards have seen some significant improvement in the way their customers have been treating them.

But it probably comes as no big surprise to discover that the card companies aren't repaying the favor.

Last week, several card issuers released May figures on the health of their credit card lending. Specifically, each bank spelled out the percentage of their loans that they don't expect to be able to collect (known as the charge-off rate) as well as the percentage of accounts that have payments that are at least 30 days late (the delinquency rate).

Turns out, the numbers of deadbeats and slackers are dwindling. Most issuers saw substantial improvements on both measures. American Express (AXP), Bank of America (BAC), Capital One (COF), JPMorgan Chase (JPM), and Citigroup (C) all saw declines in both charge-offs and delinquency rates. Discover Financial (DFS) also saw delinquency fall, although charge-offs rose slightly.

As LowCards.com CEO Bill Hardekopf commented, "Fewer delinquencies and smarter lending practices are good for banks." Credit card users, though, aren't seeing much of a break from the improvement in delinquencies and charge-offs.
We're getting punished for good behavior

Over the past several years, the interest rates on credit cards have moved higher, even as interest rates on savings accounts gradually fell. And more recently, card rates have barely budged, with fixed-rate cards not having moved since March, and variable-rate cards falling by just 0.03 percentage points.

With average interest rates hovering in the 14% range and even low-rate specialty cards still fetching double-digit rates, it's clear that banks are doing their best to collect as much interest as they can in light of new consumer protection regulations that limit their ability to raise rates on existing cardholders.

What that means is that no matter how favorable the economy may get, you shouldn't expect to see card rates go down, making it that much more important to avoid carrying a balance on your cards if at all possible.

Motley Fool contributor Dan Caplinger thinks banks should share the wealth. You can follow him on Twitter here. The Motley Fool owns shares of Bank of America, JP Morgan Chase, and Citigroup. Motley Fool newsletter services have recommended writing a covered strangle position on American Express.


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3 Comments

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jhrooney

Bug, people need to live within what they make, not in front of it. Credit Card companies are in business to MAKE MONEY. The sad truth is the only people that care are the charities, AFTER THEY TAKE THEIR CUT. If this sound cynical, it is, based on long experience. It sounds like you off sping better take a year off, go to work, and go to night school, something many of us were forced to do.

June 27 2012 at 1:17 PM Report abuse rate up rate down Reply
dollibug

Some people just get caught up in the system.....with job loss, sickness...and then the credit card company who DEMANDS payment....interesting that there are some companies who DO NOT CARE....what people are dealing with....most of them DID NOT PLAN any of this....I had made preparations to cover any thing that I might owe....by having disability insurance through my employer....was laid off 2 days after I had surgery...I had filed a workers compensation claim....the company denied my disability and the workers compensation claim...with FALSE INFORMATION....and the NC Industrial Commission allowed this to happen...I can no longer pay my child's college bill....things happen which NO ONE can control....I got SHAFTED by the system myself....IT IS WHAT IT IS....

June 25 2012 at 8:54 AM Report abuse -1 rate up rate down Reply
Go For Surgery

very good.




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June 23 2012 at 8:42 AM Report abuse -2 rate up rate down Reply
Go For Surgery

very informative

June 23 2012 at 8:41 AM Report abuse rate up rate down Reply
Somey

The banksters are the slimiest creators on earth.

June 23 2012 at 8:31 AM Report abuse -1 rate up rate down Reply
cpo1514

Is Obama the bank or the borrower????

June 23 2012 at 7:27 AM Report abuse +1 rate up rate down Reply
Gumby

I often see same products with greatly varying prices.. Refurbished products are usually returned items unused that goes for lower prices.

June 22 2012 at 1:39 PM Report abuse rate up rate down Reply
Gumby

If I run a credit card business, I would seek best prices for any product that my credit customers want to buy and let them know about that so they can cancel the purchase and go to different store with the lower price either by online or at store. This wil make all stores really shaking in boots!

June 22 2012 at 1:37 PM Report abuse rate up rate down Reply
Gumby

Visa, MC, Discover,, watch out from below... Pay Pal will take customers away from you !!!!!!!!!!!!!!!

June 22 2012 at 1:33 PM Report abuse rate up rate down Reply
Brian

This is what happens when the government get's involved in the free market. It just makes it worse and prevents companies from doing right to their customers because of all the over regulation. So there you go all you morons that said "good job obama, go get thoes greedy credit card companies" This is what you get, succeeded in preventing the free market from working.

June 22 2012 at 10:10 AM Report abuse -3 rate up rate down Reply
1 reply to Brian's comment
evd10

"This is what happens when the government get's involved in the free market."...It does when the regulations are designed to protect the deadbeats and slackers. Of course that is what many of the Democrat's constituents are.

June 25 2012 at 9:30 AM Report abuse -1 rate up rate down Reply