Credit Card Interest Rates

What do personal bankruptcies have to do with bank card interest rates?

I'm Shirley Rooker for the Federal Trade Commission.

In an attempt to reduce credit card losses, several major banks are now tying bank card interest rates to the credit records of applicants.

This means that if you have a sterling record, you'll get a better rate than if you've missed a few payments or bounced checks in the past.

Banks are getting tough because delinquent payments and bankruptcies are reaching record highs. In order to stem the losses, banks are now using your credit history to determine the amount of interest you'll be charged on your bank card, particularly important if you carry a balance from month to month.

One major problem with this system is that it makes it difficult if you are trying to shop for a card with the lowest possible interest rate since you won't know what rate you're getting until the application has been processed.

The best deal is a credit card that's available without an annual fee; or, if you carry a fee, a card that offers low interest rates.

I'm Shirley Rooker, director of WTOP radio's Call For Action for the Federal Trade Commission.

January 2002