Q: Chase raised my interest rate by nearly 4%. I can’t figure out why because nothing has changed with my credit that I know of. Do you know why this would happen? Have you heard anything about a Chase interest rate increase going on for 2011?

A: Well I don’t know why you experienced a Chase interest rate increase, I can say this…

Ever since the “The Great Recession” the credit card industry has changed the way they lend money. Years ago it was possible to get dirt cheap interest rates, but when the credit crunch went down, even many of the most creditworthy customers defaulted on their card debt. Because of this, credit card companies incurred massive losses for several quarters in a row during that dark period.

Of course those days are behind us now, but they banks now realize that a financial disaster of that magnitude is possible. In turn, all banks (including Chase) have had to re-evaluate the cost at which they let customers borrow money.

Furthermore, the credit card reform has made it much harder for issuers to raise rates on customers when and if their risk profile change. Unfortunately, the consequence of this has inadvertently been for banks to raise rates across the board slightly for everyone, since they may not be able to raise them when a customer’s credit score nosedives.

Although I have no way of knowing, I speculate these things may be the reason for your Chase credit card interest rate increase. But doing so is something all banks and credit unions have done, not just Chase.

Are credit card interest rate increases a blessing in disguise?
Obviously if you have been slammed with an APR increase that you can’t afford, it’s unlikely to be blessing! However what I am referring to is the credit card industry as a whole… perhaps we had cheap credit for too long (after all, that is what built us up to the financial meltdown). If there’s any benefit that comes out of paying more for borrowing it’s that it may help us avoid getting into another financial tsunami in the future.