Default interest rates on credit cards going up

As the economy continues to lag, credit card banks are suffering as more and more cardholders pay late—or simply don’t pay at all. How do credit card companies compensate for money its customers don’t pay back? By raising fees and interest rates. One of the most profitable income sources for credit card companies is the “default APR”, or the higher interest rate the bank charges you when you make a late payment.

Often between 20 and 28 percent, default rates are a cardholder’s worst nightmare. Not only can they easily double the amount of interest you pay each month, they make it that much harder to pay off your balance. Both Bank of America credit cards and Discover credit cards now charge default interest rates of over 30%.

Avoid default interest rates

To avoid being hit with these outrageous fees, pay your credit card on time. If you’re having trouble, call your credit card company before you’re late. Forgot to call? Call them anyway, and ask them to reduce your default interest rate, which many will, especially if it is your first time being late.

What to do if you’re late

Finally, if you are consistently late on your credit cards, consider getting professional debt help from a company like Care One Credit Counseling. Though not for everybody, these companies can often negotiate lower interest rates (and lower monthly payments) with all of your creditors.