Why are the banks punishing people by hiking up credit card interest rates?

[Xenu]

People I know are suffering from banks recently doubling or even tripling their credit card interest rates in result making the minimum payment from $200 to $600. Some have never made a late payment and have a 750+ credit score.

In return those with great credit scores are contemplating to stop paying their credit cards or even considering filing bankruptcy. They realize that if they pay their minimum payment the balance will never get lowered. The bank will just sit on the balance while making money off of the interest, so it is almost pointless to pay.

Why are the banks punishing those who are loyal to them? If people stop paying their credit cards the banks will lose their money. If their loyal customers have bad credit scores the bank will not be able give out loans.

Although the bank is making money now, do they not realize that this will backfire on them sooner or later? If people with good credit scores file bankruptcy/don't pay the banks won't be able to finance cars, homes, etc. Will this in turn make our recession worse?

 

[Spock (rhp)]

annualized default rates on credit cards are high and rising. for those who carry balances near their limits, I've been told that default rates are now over 10% per year.

so the banks need to cut exposure to high balances -- this is one way of doing it.

[also, credit reforms required them to increase minimum payments.]

 

[rebeli812]

theyre trying to make as much as they can before the ball drops feb 2010. what they would have you believe is that with more people defaulting they have to malke up their loses. and yeah it causes more people to default. but they are paying all that interest until they default. 6 mos. after default the debt is charged off. they claim a loss on taxes. they lose nothing. then they sell the debt to junk debt buyers thus making more money on it. when all is said and done they will whine to the gov. about all the defaults and money they lost and either get another bailout or convince the gov. not to change the current law. neat game eh.