The media has been abuzz recently with articles (here and here and here and also here) about rate-jacking–the often arbitrary increases in cardholders' interest rates. At first glance rate jacking makes little sense. Why raise rates on a good, paying customer? The cardholder might decide to close the account. Or the customer might not be able to service the higher rate debt and default? Why mess with a paying customer these days?
To understand rate-jacking, you have to understand two factors about credit cards: lock-in and the incentive to increase account volatility created by card securitization.