Credit card companies know there's no free lunch, but they're letting more customers get a taste as an enticement by gouging their existing card members.
The average credit card interest rate for people with fair credit has hit a shocking 21 percent, up more than 2 percent from only a year ago, according to industry group CardHub.
Credit card companies, which attract new customers with zero percent teaser rates and more rewards, have raised rates while their costs remain historically low, industry observers say.
"Credit card interest rates were higher across the board during the first three months of 2014 relative to the same period last year," according to CardHub's Landscape report. The report said the increase was roughly 2.12 percentage points on a year-to-year basis.
Another rising and unsettling trend: More strapped consumers are taking pricey cash advance deals, a CardHub official warns.
These customers are forgetting the credit card woes of 2008, when delinquency rates rose because, as card companies stopped offering cheap deals, many consumers were stuck with high-interest card debts, he says.
Indeed, some consumers aren't considering that long-term effect of teaser rates, CardHub CEO Odysseas Papadimitriou warned.
He says this is part of a strategy by card issuers to increase profit margins by borrowing at near zero rates and then charging customers 21 percent interest instead of 18 percent.
"I think credit card companies are essentially realizing that consumers are more focused on introductory rates. So they are not paying much attention to what happens after the introductory rates," Papadimitriou said.
Bill Hardekopf, CEO of LowCards.com, agreed that rates have been rising, adding that some consumers aren't looking "beyond the teaser, introductory rates and when they can be ended, such as for missing a payment."
Neither MasterCard nor the American Bankers Association wished to comment.
A three percentage-point increase on a credit card can make a big difference, Papadimitriou noted. "It doesn't seem like much, but in relative terms, that really adds up over the long term," he said.
Papadimitriou added that the increased use of cash-advance loans is a worrying trend. These loans trigger interest the minute the loan is taken and have no grace periods. The fees on these loans went up in the first quarter by some 10 percent, increasing to an average of $12.31, CardHub said.
Such loans are the worst ways to access credit, Papadimitriou believes.