Beware rising rates on credit

The news in interest rates this year has all been falling numbers. Millions of borrowers are benefiting from the Federal Reserve's 11 cuts, refinancing mortgages and buying new cars.

For a segment of credit-card users, however, rates are headed upward. Chalk that up to an attempt by the credit-card industry to boost profits in a sagging economy. Lenders hope to offset losses by collecting more from borrowers flagged as the ones most likely to miss payments.

Atlanta-based CompuCredit Corp. charges 35 percent for an Aspire card issued to its "high-risk" customers, and Providian Financial Corp. recently raised the rate on its high-risk accounts from 23.9 percent to 29.9 percent. "It's almost starting to border on loan sharking," says Jack Jones of Consumer Credit Counseling Service in San Francisco, which advises overextended borrowers.

Higher rates can mean deep trouble for those who take a long time to pay off balances (see chart, right).