Lots of bad credit card debt keeps rates and fees high

Thanks to a number of factors, credit card companies have been handcuffed by losses in recent months, leading them to increase interest rates and fees any way they can.

According to a report in the Newark Star-Ledger, a combination of the regulations from last year’s Credit Card Accountability, Responsibility and Disclosure Act, tighter consumer spending and an increase in credit card debt that companies have been forced to write off has led to a steady rise in rates and fees. Companies have raised the average interest rate from 12.1 percent to 13.64 percent in the last year to help make up their profit shortfalls.

According to the report, credit card lenders are also raising basic APRs because they are adding low introductory rates and other incentives to help them compete for new customers with higher credit ratings in a more cutthroat market.

Credit card companies are also trying to be more cautious about which consumers they lend to. In recent months, there has been a spike in the amount of credit card debt they have had to “charge off,” or erase from their ledgers because they believe the balance is irretrievable.