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Mess up once and that's it, you're out of luck. Banks won't hesitate to increase your interest rate or impose big fees if you pay late, etc. It used to be that if you were a good customer, you could call and basically apologize, explain your mistake, and ask that the fee be removed or your rate re-adjusted. But no longer. Card companies are holding firm to their punishments, and no amount of cajoling will change their minds.

This seems counterproductive to me. Someone having issues with paying their credit card payment on time, gets slapped with higher interest rates. Or if they are late on only one payment.

Aren't they shooting themselves in the foot by making it harder for people to pay off their balances?

That said, I pay all of my bills on time. Thankfully!

"Aren't they shooting themselves in the foot by making it harder for people to pay off their balances? "

Yes, but they don't see it that way. They are going for the quick buck and accounting profits. As long as bonuses are paid this year, never mind that people will file bankruptcy and they won't ever realize their profits.

By lowering the limits, they get to charge over-the-limit fees, and raise rates to 30%.

This seems counterproductive to me. Someone having issues with paying their credit card payment on time, gets slapped with higher interest rates. Or if they are late on only one payment.

Aren't they shooting themselves in the foot by making it harder for people to pay off their balances?

No, because they are predatory lenders. As you noted normal lenders and businesses realize that when a customer has trouble paying a debt the best approach to collect the debt is to extend the terms, reduce the interest rate, etc. But that isn't the goal of most large credit card issuers. Their goal is to get the credit card pushed up to their default interest rate and collect the interest for as long as possible. Collecting the principal only cuts their profits, so they want to push the interest rate so high - 33% in some cases now - that the borrower finds it very difficult to pay off the balance.

Of course this has the side effect that it causes great financial hardship for their customers/victims. In some cases their customers choose to default on their mortgages in order to pay their credit card bills, since the mortgage is a non-recourse loan and the credit card debt is. But for the bank, which resold the sub-prime mortgage, they still consider it worth the effort to wring out some more income from their customer.

The banks view the high interest credit cards the same way they viewed sub prime, high interest rate mortgages, as a giant source of profits.

You can guess who ultimately pays for the bailout when their predatory lending schemes go awry.

Aren't they shooting themselves in the foot by making it harder for people to pay off their balances?

No.

If you don't carry a balance, they only make a little bit of money on the fees they charge the merchants for processing. A borrower with a high balance who will never pay off the balance is worth a whole lot more as a customer. Where else is anyone but a loan shark able to make as much interest?

"Aren't they shooting themselves in the foot by making it harder for people to pay off their balances?"

Dirty little secret. They do not want you to pay off your card.

At an effective annual interest rate approaching 30% they want you to bea permament annuity for them.