Why credit card rates didn't fall along with mortgage rates

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| By Mitch Lipka, MSN Money

To put it simply, credit card lenders have much more to lose when borrowers default on debt.

Since the financial crisis of 2008, interest rates have fallen sharply for all kinds of financial products: mortgages, savings accounts and corporate bonds, just to name a few. Yet as the Federal Reserve has held rates at unprecedented low levels, one type of loan rate has been seemingly impervious to change: Credit cards.

"The rates on credit cards remain stubbornly high because they should be higher," said Daniel Ray, editor-in-chief of CreditCards.com. "They'll never fall to the levels that mortgage rates enjoy, and they shouldn't."

At the same time mortgages were hovering in the mid 4% range, credit cards interest rates were averaging close to 15%. It might not seem like it makes much sense for the rate on one type of loan to plunge while the other doesn't, but credit card experts explain there are quite a few reasons, starting with the most fundamental.

A mortgage -- and a car loan -- are secured by property. Fail to make your payments and the lender can repossess the home or car and sell it to recoup some, or all, of its losses. Fail to pay your credit card and the bank can put you in collection, but taking back its card isn't going to pay their bills. That means the lender is taking on a much greater risk, particularly when you consider that some credit card limits can be more than what many people pay for their cars.

"Lenders always feel more comfortable with secured loans, but the recession helped boost the spread," Ray said. "Today's mortgages are, on average, about 10 percentage points less expensive than the average credit card loan, and even with recent increases in mortgage rates, that 'spread' is still near a record size. One big reason is that the Federal Reserve stepped in after the recession to prop up the home-lending industry. It offered no such rate-tamping help to the credit card industry."

It is possible to find a lower interest rate credit card if you're among those who have the best credit scores. But, for the most part, they'll be nothing like the rates people get for their mortgages or car loans.

The credit card industry also has to factor in a considerable amount of fraud it must contend with and balancing its losses by taking on a broad spectrum of consumers against the rates it charges to its best customers. In addition, consumer protections put in place by the Credit Card Act of 2009, which took away some of the freedom card issuers had to assess fees, forced an increase in interest rates immediately before the law took effect.

While higher rates are with us those reasons, you'll still see plenty of teaser rates of 0% -- of course you can't get lower than that -- but they are introductory offers that typically expire in 6-18 months and then convert to something typically north of 10%.

"The lowest rate I've seen on a card --other than the promotional rates of 0% -- is 5% on the Speedway SuperAmerica Credit Card," said Bill Hardepkopf, CEO of LowCards.com.

But, for the most part, cards considered low interest hover in the 10%-12% range. A few dip below, such as the Barclaycard Ring Mastercard, which has been offering an 8% rate, according to LowCards.com.

The credit card business is highly competitive, Hardekopf said, allowing consumers -- particularly those with the best credit -- to shop around to find a combination of features that suit them best. That could include a low interest rate, rewards or other perks.

Just don't expect your credit card rate and mortgage rate to match.

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James Murdoch: I didn't know about phone hacking

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LONDON — He didn't see. He wasn't told. He didn't know.

Called back to Britain's Parliament after former News Corp. employees challenged his credibility, senior executive James Murdoch insisted he'd been kept in the dark about widespread phone hacking at his now-defunct News of the World tabloid, blaming two of his senior lieutenants for failing to warn him of the paper's culture of criminality.

"None of these things were mentioned to me," he told an often-skeptical House of Commons' media committee.

Over more than two-and-a-half hours of questioning, Murdoch stuck to that line.

"It was not shown to me," he said of an explosive email which implicated one of his top reporters in phone hacking.

"It didn't occur to me to probe further," he said when quizzed about the legal advice his subordinates had supplied him.

"It didn't seem necessary for me to ask for a copy," he said of a seven-page document warning of overwhelming evidence of illegal behavior at his company.

Speaking quickly and confidently, Murdoch laid the blame at the door of former News of the World Editor Colin Myler and former in-house lawyer Tom Crone, both of whom resigned soon after the scandal broke earlier this year. Over the past few months, the pair have challenged the credibility of their former boss, accusing the 38-year-old News Corp. executive of not telling the truth when he claimed they never told him about the incriminating email back in 2008.

Murdoch made one important concession to their version of events — acknowledging that he'd been briefed on the incriminating email back in 2008 — but insisted that its importance was kept from him.

"What never happened is Mr. Crone and Mr. Myler showing me the relevant evidence, explaining to me the relevant evidence — and its relevance — or talking about wider spread criminality," Murdoch said. "That simply did not happen."

In a statement, Crone attacked Murdoch's testimony, insisting that he hadn't misled lawmakers.

"At best, his evidence on the matter was disingenuous," he said of Murdoch's comments. He did not immediately return calls seeking further comment.

Myler's telephone number is unlisted, and a letter sent to him more than a month ago has gone unanswered.

Murdoch's solo performance was far less dramatic than the July 19 hearing at which his 80-year-old father Rupert Murdoch repeatedly banged the table to back his points. Although the navy-suited James Murdoch showed flashes of annoyance — occasionally starting his answers with "as I testified earlier" or "as I answered earlier" — he kept his cool, even when Labour lawmaker Tom Watson described him as a bumbling crime lord.

"You must be the first mafia boss in history who doesn't know he's at the head of a criminal enterprise," Watson said in what sounded like a carefully crafted sound bite.

Murdoch, stony-faced, dismissed the comment as inappropriate.

He struck an apologetic tone when questions steered him toward his company's failure to get to grips with the scandal. He said executives at the company had given assurances, and that the company "relied on those assurances for too long."

"I'm sorry for that," he said.

He also apologized for the use of a private investigator to tail the lawyers of phone hacking victims, calling the practice "appalling."

James Murdoch runs News Corp.'s European and Asian holdings and remains tipped to succeed his father at the helm of the global media conglomerate. Thursday's appearance was mandated by lawmakers investigating the industrial-scale espionage at the News of the World, the exposure of which has already forced the paper's closure and scuttled a multibillion pound (dollar) bid for full control of satellite broadcaster BSkyB.

More than a dozen journalists at News International, News Corp.'s British newspaper subsidiary, have been arrested, and several executives, including The Wall Street Journal's publisher, Les Hinton, have resigned.

Although the media committee's investigation isn't as serious as the ongoing police investigation — its recommendations are nonbinding — Murdoch still needed to put on a strong show. Investors have become increasingly restive as the scandal continues to spread, and analysts say Murdoch's position as heir apparent to his father's company is under threat.

Paul Connew, a media consultant and former tabloid editor, said he believed Murdoch had given a mixed performance.

"Polished to a certain extent, but again suffering from the amnesia factor," he said.

The media committee wouldn't be calling Myler or Crone back for more testimony, Chairman John Whittingdale told reporters after the hearing. He said the committee's lawmakers had already heard from the pair and would now be weighing whose version of events to believe.

"It is plain that the two accounts we've heard, one of them cannot be true," he said.

Connew warned that even if Murdoch's reputation isn't damaged by the report, he would not be home free. A judge-led inquiry into Britain's media could call him back to the U.K. for more questioning. And detectives could dredge up more damaging revelations.

Lawmakers suggested as much Thursday, with one asking whether Murdoch was aware of any phone hacking at The Sun, the News of the World's sister paper and currently Britain's biggest selling daily.

Murdoch refused to say, citing an ongoing investigation.

Asked whether he would close The Sun if evidence of phone hacking emerged there, he declined comment.

Separately, Scotland Yard chief Bernard Hogan-Howe announced Thursday that police were working their way through some 300 million emails from News International.

Some 120 officers and staff are investigating the phone hacking scandal. The force said it had contacted less than a third of the News of the World's nearly 6,000 potential victims.

© 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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