Why Credit Card Rates Are Defying Gravity

One reason the Federal Reserve is having so much trouble jump-starting the economy by pushing interest rates down is that many hard-pressed banks just won't cooperate. They are continuing to milk one of their most profitable lines of business: credit cards.

Bank credit-card rates peaked at close to 19% in early 1985 and then moved down below 18% in 1987 and 1988. But they turned up in early 1989 and then rose steadily last year. In the fourth quarter, they hit 18.23%--their highest level since 1986.

"Even if delinquencies rise appreciably," says economist Nancy R. Lazar of C. J. Lawrence Inc., "the banks will still be making a bundle on their credit-card business. But obviously, such outrageous rates aren't likely to induce consumers to borrow more."

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE