Credit card interest rates up 20 percent in six months, study says

Problems with your credit card? Can't pay because of high interest rates?

It no wonder. Credit card rates have risen 20 percent in the first six months of the year in advance of new consumer-oriented legislation going into effect, according to a study by the Pew Charitable Trusts.

The Pew Safe Credit Card Project reviewed the lowest advertised rates for nearly 400 bank-issued credit cards. Researchers found that the median lowest advertised interest rate increased from 9.99 percent to 11.99 percent since December last year. In the same period, the Federal Reserve dropped the target federal funds rate from 1 percent to .25 percent to encourage bank lending.

"So while the cost of money to issuers has fallen, the cost of credit to consumers has increased by 20 percent," Pew spokesman Kip Patrick said. "A similar situation might be as if the government opened up federal oil reserves to lower the cost of gas, and then consumers go to the pump and find that the cost of gas has jumped 20 percent."

The study is not slated to come out until late September, but Pew released highlights this week because the first consumer protections provisions of the Credit Card Act of 2009 to into effect Thursday. The key parts of the legislation, which will make it harder for card companies to quickly raise rates, go into effect in February.

Credit card companies have indicated that they've risen rates not just because of the pending restrictions but also to offset rising credit card defaults. They also maintain that some financing sources for banks remain tight despite federal invention.