Amex interest rate rise

gmatwork

Can anyone explain why, with interest rates tumbling to an all time low, Amex can wite to me and tell me that my Gold Card APR is going up from 16.4% to 19.9% from March 1st 2009?

TFD_2

Interest rates are tumbling, but due to unemployment, etc increasing, debt is now riskier for banks than it was before.

MrsTinks

APRs on cards and loans don't actually have anything to do with the BoE base rates
The APRs are measured based on economic climate and individual applicant risk - of course what tends to be forgotten is that it becomes a catch 22: you need to borrow at a rate under 10% (as an example) but the banks feel that you are a high risk because of available credit and previous history - then added to that is the higher risk of you loosing your job as there are more redundancies - so suddenly instead of a small risk when they lend money they are looking at a medium to high risk - that means they want to make more money to compensate for the % of people who WILL be unable to repay the money. But the higher the APR the more people will struggle to repay and then it starts spiralling

97trophy

gmatwork wrote: »

, Amex can wite to me and tell me that my Gold Card APR is going up from 16.4% to 19.9% from March 1st 2009?

Amex and many others want to reduce their credit card loans to consumers. A reversal of the trend seen prior to the credit crunch. Their default ratio is much higher then they ever expected and this has hit their earnings in a big way.

So basically, they are saying if you want to borrow money go elsewhere. This is the new financial world we live in.

System

This is APACS explanation:

Why don’t APRs fall when the Bank of England
base rate is falling sharply?
Although base rates have fallen sharply, because
of the way credit card lending works, the risk of
lending has not fallen and may have actually
increased. A credit card APR is not actually an
interest rate; it represents the total cost of credit
being granted. An APR will include all credit card
fees and charges as well as the costs of operating
an open-ended line of credit along with the costs
of bad debt and fraud. Base rates are only one

factor in the level of an APR.

UNDERGROUND