Although Americans are deeper in debt than ever, they are paying off bigger portions of their monthly credit-card bills.

For Card Issuers, which profit by collecting interest on unpaid balances, that's bad news. In the past, when interest rates crept up, as they are doing now, fewer cardholders could afford to pay down balances.

To make matters worse for card Issuers, federal bank regulators issued new guidelines in 2003 meant to ensure that cardholders pay off more each month than just the fees and interest charges that have accumulated. To comply with the rules, many banks have raised minimum-payment requirements, bumping up the payment rate further.

Card issuers are trying to replace...revenue by increasing late-payment fees and raising interest rates for customers unable to pay their bills in full.

In an effort to build customer loyalty and increase spending, issuers have launched a slew of new cards and have introduced new checkout-counter technologies to encourage more card use. They have spent billions of dollars to grow through acquisitions, buying rival card issuers and specialized credit-card portfolios from retailers.

Credit-card companies make most of their money by charging interest to customers who don't pay off their balances each month. Such customers are known as "revolvers." Card issuers, who have raised interest rates in tandem with Federal Reserve increases, now charge an average interest rate of 17.9 percent on unpaid balances, according to the Nilson Report, which tracks the card industry.

to read the full article...click here.