Some card customers to see rate hike

INDIANAPOLIS (WISH) - Some credit card companies are sending notices to their customers, telling them about dramatic increases in interest rates.

24-Hour News 8 took one of the notices to Butler University business professor William O'Donnell and asked him to explain -- in laymen's terms -- what it says.

"The first thing that they're doing is they're adding a significant increase in your rate -- the interest rate they're going to charge," O'Donnell said, regarding the notice.

O'Donnell also said the credit card company is dramatically raising the interest rate for a cash advance.

"If you use your card to get a cash advance -- use your card like an ATM card -- they're really going to nail you. You're taking your annual rate up to almost 25 percent. That's for every dollar you take out in advance, they're gonna charge you a quarter. It's amazing," said O'Donnell.

O'Donnell said the increase is a trend.

Analysts say credit card companies changing the rules now because they don't want to see so many of their own products in consumer's hands anymore.

O'Donnell said banks cannot afford to increase the amount of debt they have out there with bad customers. The hope is that reining in the bad debt -- and increasing interest rates -- will help make up for the billions of dollars in bad debt banks wrote off last year. The increases will also go towards the billions more they're expected to write off this year.

Consumer Wally Cox is grateful he and his wife are able to pay off their credit card balances every month.

"I think it's sad sometimes, the situation being the way it is, that companies like this come out and suddenly adjust. And I'm not talking about just little small adjustments," said Cox.

The bottom line is that if you receive one of the notices in the mail -- don't throw it away. Read it and make every attempt to understand it because it could cost you if you don't.