American Express chairman parties at NBA All Star game.

Business: While American Express and others hike up credit rates for those who are trying to play by the rules.

Lenders came under fire yesterday in a U.S. Senate Banking Committee hearing for raising interest rates, adding fees and cutting credit lines, even for consumers perceived to be low- risk with high credit scores. Connecticut Democrat Christopher Dodd, the chairman, called the practices “gouging.” The federal funds rate, or the interest rate banks charge each other for overnight loans, is as low as zero and U.S. lawmakers have agreed to a $787 billion economic stimulus plan funded by taxpayers. Rates for consumers should be falling faster than they are, said Ben Woolsey, director of marketing and consumer research at CreditCards.com, an online resource for credit-card users. Banks, facing an increase in defaults and a decline in consumer spending, are “still very reluctant to pass lower rates or increased credit access to consumers,” said Woolsey. Rate Changes The average interest rate charged on credit-card balances decreased to 13.4 percent in November from 14.4 percent a year earlier, according to the Federal Reserve’s December G19 report, which tracks rates for credit-card accounts. The prime rate has decreased to 3.25 percent from 6 percent last February. Most variable credit-card rates are linked to the prime rate, which follows the federal funds rate. Rate changes announced by New York-based Citigroup Inc., the biggest U.S. credit-card issuer, American Express Co. and Charlotte, North Carolina-based Bank of America Corp. are intended to raise revenue, said Woolsey, who is based in Austin, Texas.

Meantime, Credit Card leaders like Ken Chenault of American Express is partying hard at the NBA All Star Events. I wonder if these extra fees are used to pay off the corporate credit card.


(L-R) Ken Chenault and Jay-Z attend Sprite's 3rd Annual Jay-Z And Lebron James "Two Kings" Dinner & After Party.