Credit-card deals become harder to find

Seen your credit-card statement lately? The prime rate, which credit-card rates are supposed to track, is at 3.25 percent, its lowest level since 1955. But the interest charged by the average credit-card company is already more than 13 percent – and rising.

That's the largest gap in more than six years (see chart) and a measure of the impact that the recent recession has had on lenders. More important, it's an indication of how the options have narrowed for borrowers, especially for those who carry a balance on their card month to month.

For some of those borrowers, the new environment can be a shock.

When the interest rate on his Discover card shot up four percentage points a few months ago – to just over 17 percent – Kyle Schroeder called to ask for a lower rate, as he'd successfully done in the past. This time, Discover wouldn't play ball. Nor would American Express agree to raise the limit on a card he has with them.

Mr. Schroeder, an entrepreneur who manufactures and sells shaving cream in Los Angeles, is usually in a position to pay his balance in full, but he will calculate which of his four cards would be best to use if he has to make a large business purchase. After his experience with Discover, he paid off the balance and stopped using the card.

This is the new norm for many consumers. With credit markets still tight, many credit issuers feel less pressure to negotiate to keep current customers.

Mel White, a marketing executive based in Portland, Ore., couldn't get Capital One to lower the rate on a card he's had with them since 1999, currently at 15.9 percent. Instead, they offered him an interest-free cash advance for the amount he's currently carrying on his card for one year and a $150 fee.

Consider a balance transfer carefully

Transferring balances to cards with lower rates is one solution, provided the transfer fees don't cancel out the interest savings. Consumers can also try paying down their debt and asking for a lower rate again. But credit-card companies might cut limits if consumers make large payments toward their balance, cautions Robert Manning, author of "Credit Card Nation" and founder of the Responsible Debt Relief Institute, a nonprofit based in Rochester, N.Y., that helps individuals and financial institutions assess consumer debt.

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