Unlike other interest rates including those for mortgages which are seeing 50 year lows, credit card interest rates are getting higher. Even the best customers are paying around 3.25% on monthly interest charges.

Experts contend the skyrocketing rates are largely an ‘unintended consequence’ of the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) which was passed by Congress in order to stop unfair practices by the credit card industry and better protect consumers.

Unfortunately, it appears the results backfire in some aspects and the fallout is actually hurting consumers. Credit card companies have had to make it through the loopholes and have ended up charging consumers more in interest since they are now regulated in how much fees and penalties can be assessed.

Other issues that have sprung up for consumers include the credit card companies increasing amounts of existing penalties, lowering consumer credit limits, and closing the account completely. Consumers that do not maintain a good track record of responsible spending and monthly payments can end up owing sizeable amounts of interest and penalties. Credit reports will also be affected and the all-important credit scores will decrease.

Experts believe the interest rates on credit cards will come down throughout 2012 but consumers are advised to contact their credit card companies in an effort to negotiate a lower rate. Not all companies will be accommodating to such a request but it has helped many consumers fight back against the rate increases.

December 2011 Average Credit Card Rates

In December, the difference between interest rates for individuals with good credit compared to individuals with average credit narrowed, dropping between a half a percent to 3.57%.   The overall average interest rate for all credit cards is 16.71%.

The only category of credit cards which did not change their average interest rates this quarter are business credit cards.  The overall average interest rate for the different credit card categories is as follows:

• Non-rewards average interest rates:   14.71%
• Business non-rewards average interest rates: 14.74%
• Consumer rewards average interest rates: 17.58%
• Business rewards average interest rates: 15.53%
• Student average interest rates: 16.86%

Reasons for Credit Card Interest Rate Changes

If the US bank prime rate hasn’t changed, the following situations are potential reasons for changes in the average credit card interest rate:

• Increasing inflation causes credit card interest rates to increase
• Profit strategy adjustments by credit card companies
• Changes in market interest rates

There are more than 500 million credit cards in circulation in the United States, accounting for about $700 billion of household debts.

Bank Industry Concerns

Banking industry officials expressed concerns over the initiative which would result in credit card agreements with fewer pages, fearing it would put them at a higher risk for lawsuits.  A prototype credit card agreement was released by The Consumer Financial Protection Bureau to the American Bankers Association.  The association’s chief counsel, Kenneth Clayton, said while the association supports the bureau’s goal, he felt the credit card agreement prototype raises liability concerns that could be improved and made even shorter.

The Consumer Financial Protection Bureau will allow the general public to view the prototype agreement and offer their opinion as well.  Most banks use an average of 5,000 words in their credit card agreement, and the prototype uses just 1,100.

American Express

Shopping from specific brands including Apple and Target during Cyber Week of November 21^st to November 30^th will allow American Express cardholders to earn five times the normal rewards points.

Amazon Rewards Card

Buying digital downloads from Amazon.com on your Amazon rewards card between November 15^th and December 31^st offers additional rewards points to cardholders.

Discover Card

Cash back Discover card members will earn 5% to 10% additional cash back when shopping specific retailers on Discover’s ShopDiscover website during the holiday season.

Retailer-Specific Credit Cards

Customers should be prepared for credit card offers in the checkout lines when cashing out at many retailers like Gap, Macy’s and Best Buy.  The holiday season is when retail credit cards are promoted – with many offering additional savings on your current purchase just for signing up for a card when you pay for your items.

The instant savings on your holiday purchase may be substantial, but keep in mind interest rates on retailer-specific credit cards are almost always about 10 percentage points higher than a traditional credit card, and will negate any rewards or cash back you earn if you don’t pay your credit card bill in full each time the statement arrives.  You can also only use the card at the retailer that issued it, so unless you shop at the store frequently, it may not be useful to apply for a retailer-specific credit card, no matter how great the promotional offer is!

However, there may be a point where there are only so many airline miles to be attained. In this case, a frequent flier may consider switching to a new credit card that offers relevant rewards such as free stays at quality hotels.

Understanding Hotel Credit Card Benefits

Hotel credit cards are in essence a loyalty rewards program where travelers get to earn points for each stay that can translate into free visits at any of the hotel’s other locations. For those who travel a lot using their hotel reward credit card, there is also the possibility of earning the status of progressing to a privileged cardholder with even more perks.

Unlike airline benefits, hotel credit card rewards often provide more options since there are more choices as to where you can stay and reap your rewards benefits. Hotel credit cards are also known for offering incredible deals because competition between the hotel chains is much more aggressive than it is among airlines.

Frequent travelers can use both hotel and airline rewards cards at different intervals in order to maximize rewards benefits they can actually use. This can be cost-effective for both business travel and personal travel itineraries. Rewards holders have been known to book entire vacations free of charge for the entire family based on their reward earnings.

More than Just Rewards

While the extended benefits of rewards credit cards in general can be attractive, consumers need to remember the finer points of applying for a new credit card. Beyond the great rewards and benefits, new applicants should also consider the following issues:

Membership Dues – while the rewards and benefits may be great, consumers need to calculate the actual math if a membership fee is required for card membership. More credit card companies are charging annual fees and depending on the card provider, the annual membership costs may not be cost effective to one’s budget.

Normal APR – consumers need to focus on what the annual percentage rate of interest will be on the credit card after any promotional benefits end. Many credit card providers still utilize a low-interest introductory offer to lure in new business but the offer is only good for a few months to a year. After the promo deals end, the consumer needs to ensure they can afford the regular APR of their rewards credit card.

Limitations on Rewards – each credit card provider has different protocol for transferring points into rewards so it is vital that all credit card applicants read the fine print before committing to a rewards credit card. While you may enjoy the offered benefits, the way the credit card company rewards those benefits may not be compatible with your lifestyle or spending habits.

Selecting a new hotel credit card will require some research on the benefits and rewards of several card offers. Never take the first deal you see as there is likely a better deal elsewhere that makes more sense for your financial life. Compare several offers before making a decision on which hotel card offers the most suitable, most relevant earnings potential for your travel needs.

Credit card companies can not afford to take big risks with consumer defaults so if they are willing to offer a preliminary approval of a credit card but not at the credit card limit you needed, don’t give up just yet. There is still some hope.

Understand the Role of a Credit Score

Credit card providers will investigate the application for credit and ensure the applicant meets their eligibility requirements. In addition to have steady employment, card providers look carefully at the credit score and credit histories of the consumer. If the score is low or the history report reflects some money mistakes in the past, the card provider can set the spending limit of the new card based on that past credit information.

While you may not have the worst score in America, you may not have the strongest credit history at this point. The credit card company will grant you access to the card but likely will only allow a few hundred dollars in spending limits. This will limit how much money they lose should you default on the card.

How to Raise Your Credit Limit

In order to get a higher credit limit on your new credit card so you’ll have access to more spending power, consider the following tips for seeking an increase:

Pay On Time

In order to have some kind of bargaining power, you need to do everything you can to prove you are a reliable, responsible customer. One big issue for credit card companies is the payment of balances on time each month. Not only does this information affect your credit score, it also builds the confidence of your credit card company that you can use credit wisely.

Spend Small

Making huge purchases on a credit card without the ability to pay off the balance in full at the end of the billing cycle may signal you are a reckless spender. It is better to make small purchases on a credit card and then pay off the balance in full. Emergency situations may be the only exception to this rule. Overextending your credit limits means you’ll pay high fees and your credit score can drop as a result of not spending on credit cards within reason.

Eliminate Other Debts

In order to improve your overall financial life, it is wise to reduce as much of your debt load as you can afford to do each month. By freeing up your credit card limits and getting rid of monthly expenses, you’ll be able to show the card company you are working to improve your credit and are more responsible for your spending. Eliminating your debts also makes it easier to save for the short and long-term which give you more financial stability.

Contact Them Directly

If, after your efforts to improve your credit standing, your credit card company has not automatically increased your credit spending limits, you do have the option to contact the company directly and request an increase based on your past performance and current credit rating. Not all companies will be willing to honor your request when you initially open an account but after a few months of responsible spending and payments, many will oblige your request.

Credit Increase Caveat

Before you inquire about an increase in your spending limits on your credit card, make sure you are making the request because it makes sense for your financial life and not simply because you want a high number. Increased limits do give you more spending power but can also tempt you into spending more than you can afford to pay back.

When you fill out the pre-qualification form, Orchard Bank lets you know which credit card you qualify for: the Platinum, Gold, or Classic card. Then, you can review the card’s terms and conditions and decide whether you want to proceed with the application. If you don’t qualify for any of these unsecured credit cards, you’ll be given the option to apply for a secured credit card with Orchard Bank.

Orchard Bank Card Comparison

The Orchard Bank Platinum MasterCard has an annual fee between $19 and $59, a purchase APR of 14.9% or 19.9% and penalty APR of 29.49%. The exact APR and annual fee you get depends on your credit history.

The Orchard Bank Gold MasterCard has an introductory annual of $49 for the first year and $59 annual fee after that. The purchase APR is 16.9% or 19.9%, the penalty APR is 29.49%, and there’s a $19 processing fee.

Both the Platinum and Gold cards have a fraud protection benefit, but keep in mind that the Fair Credit Billing Act says you don’t have to pay for many fraudulent charges as long as you report them in a timely manner. You’re not liable for any fraudulent charges made using just your credit card number as long as your credit card is still in your possession.

The Orchard Bank MasterCard is a $29 introductory annual fee in the first year. After that, the APR is $59. The purchase APR is 16.9% or 19.9% depending on your credit history. There’s a $39 account processing fee and 29.49% penalty APR.

The Orchard Bank Secured credit card is a final option. There’s a low 7.9% interest rate on purchases and balance transfers. The penalty APR is the same as Orchard Bank’s other cards 29.49%. There’s a $35 annual fee that’s waived in the first year. Since this is a secured credit card, you’ll have to put up a security deposit against the credit limit – the minimum is $200 for this card.

Except that you have to put up a security deposit, the Secured card is actually a better deal. The APR is lower, there’s no processing fee, and the annual fee is lower, especially in year two and beyond.

The biggest benefit of these Orchard Bank cards is that you’re more likely to be approved with a bad credit history. Use these cards for 12 to 18 months to build up a good credit history, then apply for another card that has better terms.

Perhaps the biggest drawback of the Green Dot Prepaid MasterCard is the number of fees the card charges.

There’s no activation fee when you get the card online. However, when you activate your card at a retail store, like Walgreens, you’ll pay up to $4.95. Race car fans who get the NASCAR Prepaid Visa, will pay $6.95 to activate their cards.

The card charges $5.95 per month, but you can have that fee waived by either making at least 30 qualifying purchases or loading your card with at least $1,000.

You can withdraw cash from your card using an ATM. Avoid ATM fees by using MoneyPass ATMs. Withdrawals are also free when you choose the “cash back” option when you’re making a purchase at a grocery store, for example. Otherwise, you’ll pay $2.50 for withdrawals at other ATMs in addition to fees from the ATM owner. The daily withdrawal limit is $400. And the daily spending limit is $2,500.

If you check your balance at the ATM, there’s a $.50 fee. You can avoid the fee by checking your balance online, by phone, or via text message.

There’s a $4.95 fee to replace a lost or stolen card or to order a second card on your account. If you want to get your card in a hurry, you’ll have to pay a $19.95 expedited card delivery fee.

You’ll pay $4.95 to load more money on your card unless you use direct deposit, which is free. You can load a minimum of $10 and a maximum of $2,500 onto your card using cash. The total balance made up of direct deposits can’t exceed $10,000.

A 3% foreign transaction fee applies to transactions made outside the United States.

Though there are a tremendous amount of fees, there are a few ways to avoid or minimize them. Order your card online, have your money direct deposited (30 transactions a month might be hard to make), only withdraw cash using the “debit/cashback,” check your balance online or over the phone, and don’t lose your card.

Biggest Benefit

• Available to consumers with bad credit
• Replaces the need for a checking account

Drawbacks

• Lots of fees

IberiaBank Classic Visa

The IberiaBank Classic Visa is the most basic of all three credit cards. It doesn’t pay any rewards on purchases, but applicants who qualify enjoy the lowest 7.25% on purchases with no annual fee. The Classic Visa also has a 1.99% introductory interest rate on balance transfers for six billing cycles. After that, the balance transfer rate is the same as your purchase rate, which could also be 10.25% or 13.25% depending on your credit history.

IberiaBank Vis Gold Cash Back

The IberiaBank Visa Gold Cash Back rewards card also has a low interest rate and even better, the card pays cash back rewards on purchases. If you qualify, you’ll enjoy 1% cash back on purchases. There’s no limit or expiration on the cash rewards you earn as long as your account remains in good standing. The regular purchases APR is slightly higher than the APR on the Classic Visa – 9.25%, 12.25% or 15.25% depending on your credit history. The Gold Cash Back rewards card also has an introductory balance transfer deal – 1.99% for six months. After that, the balance transfer APR is the same as the purchases APR.

IberiaBank Platinum

The IberiaBank Platinum credit card also pays rewards, but this card pays points instead of cash. You’ll earn one point for every $1 you spend, and possibly 17,000 bonus points in the first year of having your credit card. You can redeem points for merchandise and travel rewards. The APR on the Platinum card is the same as the cash back card – 9.25%, 12.25%, or 15.25% depending on your credit history. You can enjoy the same balance transfer deal as the other two cards.

None of the cards have an annual fee and they all require the same application process where you must provide proof of income and have your employment verified.

Which is Best?

Of the three credit cards, the Visa Gold Cash Back rewards card is Iberia Bank’s best offering. At no annual fee, you earn 1% cash back on all your purchases. While the Platinum credit card also pays rewards, point rewards are generally less attractive than cash rewards because the value doesn’t necessarily translate dollar for dollar.

If you’re not interested in the rewards, the Classic Visa is a great option because of its low interest rate. The 7.25% rate is one of the lowest of any credit card on the market right now and is several points lower than the average credit card rate around this time. You’ll need excellent credit history to qualify for any of these credit card deals so only apply if your credit score is in the high 700s or low 800s.

Credit Limit and Bureau Reporting

Your credit limit is equal to your security deposit as long as it’s between $200 and $5,000. While your deposit is placed in an account, you don’t earn any interest on the deposit. Applied Bank says it reports your account history to the credit bureaus, which is a big benefit considering a secured credit card is a great chance to get approved for a regular credit card.

Credit Card Fees

Fees on the Applied Bank Secured Visa are minimal. There’s no annual fee or an account setup fee. But, there is a $30 fee to order an additional credit card. The maximum fee for late payments, returned payments, or a credit limit overage is $35 as allowed by Federal law. There’s no balance transfer fee, because you can’t transfer balances with this card. You can take out cash advances and the fee is either $5 or 5% whichever is greater. You’ll pay a 3% foreign transaction fee for purchases made in other countries.

There are a few other fees that aren’t listed in the credit card disclosure, that you’d only find if you combed through the credit card agreement. There’s a $30 stop payment fee if you need to stop payment on a cash advance check. You’ll pay a $.50 account information fee for making inquiries on an automated call on the credit card’s 1-800 number. The first two in each billing cycle are free, but each inquiry is treated separately, even if made on the same call. You’ll be charged a $12.95 fee to expedite a payment to avoid a late fee. There’s also a fee to increase your credit limit (even though you have to make the deposit to increase your limit).

Major Drawback

Up until now, mostly everything about the Applied Bank Secured Visa has been positive. However, there’s one big drawback – there’s no grace period on transactions. The benefit of a grace period is that you get a few weeks to pay your balance and avoid paying any interest on the account. However, the Applied Bank Secured Visa starts charging interest on your purchases immediately and the minimum finance charge is $.50. The only way to minimize your interest charges on this card is to pay your balance before the billing statement even arrives.