Fed Survey Confirms Credit Card Issuers Raising Rates and Cutting Limits

A Federal Reserve survey [PDF] released two days ago showed that a substantial number of credit card issuers have cut credit limits, increased interest rates and raised the minimum credit scores required for a credit card during the past three months.

The quarterly survey among loan officers also found 75% of banks that make credit card loans do not expect to be compliant with the provisions of the legislation until February 2010, the month these reforms go into effect.

The Fed’s quarterly survey was conducted in October and included loan officers of the CARD Act. Here are some of the findings:

• Interest Rates: 54% of banks have already increased or are planning to increase the credit card APR on their good (prime) customers. 74% of banks have already or will increase APRs on those with poor credit (sub-prime.)

• Credit Limits: Just over half of the banks have cut or will cut the credit limits of their credit card customers.

• Approval Rates: It is tougher to be approved for a credit card. 47% of the loan officers said they have or will raise the credit score requirements for prime customers qualifying for a credit card. That number jumps to 53% for sub-prime customers.

• Annual Fees: Almost 40% of the banks had increased or will increase the annual fees on credit cards.

“This report confirms what credit card customers have been experiencing all year: significant increases in their APR and substantial cuts in their credit limits,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “Issuers are trying to take these rat increases before the CARD Act provisions go into effect in February of 2010.”