The Federal Reserve has slashed its benchmark rate to 1 percent, yet many people are getting hit with higher rates and fees on their credit cards.

Normally, when the Fed cuts rates, credit-card issuers follow suit, resulting in lower monthly payments for cardholders. Although average credit-card rates have fallen slightly as the Fed has cut interest rates, banks and retailers are trying to offset rising losses in their credit-card operations by raising rates and fees across a broader swath of their existing customers.

Banks already had been tightening the screws on people with less-than-perfect credit in recent months. Now, even customers who pay their bills on time will find it more expensive to carry a balance.

J.P. Morgan Chase & Co.'s Chase unit is raising its rates on credit-card cash advances and overdraft protection, as well as its default rate, which is triggered when cardholders exceed their credit limit or are late on their payments. The bank also will start charging a $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5 percent of their outstanding balance, from 2 percent. Citigroup Inc.'s Citibank unit and American Express Co. have been notifying groups of cardholders that they will be raising their regular interest rates by two to three percentage points. In addition, Amex is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fees to 2.7 percent from 2 percent on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards.

Retailers also are getting stingier with credit. Home Depot Inc. reduced credit lines on its in-store cards, which are issued by Citibank, for customers with delinquent accounts or those whose credit scores have dropped dramatically. Nordstrom Inc. began notifying customers that it was raising interest rates on its store credit cards, while Target Corp., which also has raised interest rates and late fees, is issuing fewer cards and reducing spending limits as customer delinquencies have jumped sharply.

Many big banks reported weak credit-card results for the third quarter, with "charge-offs'' - reflecting loans considered to be uncollectible - rising to more than 5 percent of total credit-card balances and poised to deteriorate further.

"Some credit-card issuers are desperately looking to recoup their charge-off losses by increasing interest rates or hiking punitive fees,'' says Gwenn Bezard, a research director at Aite Group LLC, a research firm. "Those rates or fee increases can affect consumers that are perfectly good customers.''

Card issuers cite the current economic turmoil to explain the changes. "Obviously, this is something we're doing to reflect the cost of doing business,'' says Desiree Fish, an American Express spokeswoman.

At the same time, banks are clamping down access to credit, which could put a further crimp in consumer spending. The number of credit cards in use in the second quarter dropped 5 percent from the first quarter to an estimated 663 million - the biggest quarterly drop in several years - as people received fewer credit-card offers and issuers canceled more of those cards, says Laura Nishikawa, an analyst at Innovest Strategic Value Advisors Inc., a New York investment research firm.

Gerard Hallee, a software developer in Snohomish, Wash., says American Express notified him last month that it was slashing the credit line on his personal credit card to $500 from $12,000. Among the reasons cited: Hallee was carrying high balances on other cards, and other customers who had a residential loan from his mortgage lender also had a poor repayment history with the company.

While the 68-year-old does carry balances on several cards, his monthly balances on his Amex card are usually less than $1,000, and he has paid off his balances every month for the past two years. "I guess it's a knee-jerk reaction that they want to cut their exposure in the whole credit business,'' Hallee says.

The Federal Reserve has slashed its benchmark rate to 1 percent, yet many people are getting hit with higher rates and fees on their credit cards.

Normally, when the Fed cuts rates, credit-card issuers follow suit, resulting in lower monthly payments for cardholders. Although average credit-card rates have fallen slightly as the Fed has cut interest rates, banks and retailers are trying to offset rising losses in their credit-card operations by raising rates and fees across a broader swath of their existing customers.

Banks already had been tightening the screws on people with less-than-perfect credit in recent months. Now, even customers who pay their bills on time will find it more expensive to carry a balance.

J.P. Morgan Chase & Co.'s Chase unit is raising its rates on credit-card cash advances and overdraft protection, as well as its default rate, which is triggered when cardholders exceed their credit limit or are late on their payments. The bank also will start charging a $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5 percent of their outstanding balance, from 2 percent. Citigroup Inc.'s Citibank unit and American Express Co. have been notifying groups of cardholders that they will be raising their regular interest rates by two to three percentage points. In addition, Amex is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fees to 2.7 percent from 2 percent on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards.

Retailers also are getting stingier with credit. Home Depot Inc. reduced credit lines on its in-store cards, which are issued by Citibank, for customers with delinquent accounts or those whose credit scores have dropped dramatically. Nordstrom Inc. began notifying customers that it was raising interest rates on its store credit cards, while Target Corp., which also has raised interest rates and late fees, is issuing fewer cards and reducing spending limits as customer delinquencies have jumped sharply.

Many big banks reported weak credit-card results for the third quarter, with "charge-offs'' - reflecting loans considered to be uncollectible - rising to more than 5 percent of total credit-card balances and poised to deteriorate further.

"Some credit-card issuers are desperately looking to recoup their charge-off losses by increasing interest rates or hiking punitive fees,'' says Gwenn Bezard, a research director at Aite Group LLC, a research firm. "Those rates or fee increases can affect consumers that are perfectly good customers.''

Card issuers cite the current economic turmoil to explain the changes. "Obviously, this is something we're doing to reflect the cost of doing business,'' says Desiree Fish, an American Express spokeswoman.

At the same time, banks are clamping down access to credit, which could put a further crimp in consumer spending. The number of credit cards in use in the second quarter dropped 5 percent from the first quarter to an estimated 663 million - the biggest quarterly drop in several years - as people received fewer credit-card offers and issuers canceled more of those cards, says Laura Nishikawa, an analyst at Innovest Strategic Value Advisors Inc., a New York investment research firm.

Gerard Hallee, a software developer in Snohomish, Wash., says American Express notified him last month that it was slashing the credit line on his personal credit card to $500 from $12,000. Among the reasons cited: Hallee was carrying high balances on other cards, and other customers who had a residential loan from his mortgage lender also had a poor repayment history with the company.

While the 68-year-old does carry balances on several cards, his monthly balances on his Amex card are usually less than $1,000, and he has paid off his balances every month for the past two years. "I guess it's a knee-jerk reaction that they want to cut their exposure in the whole credit business,'' Hallee says.

A few days later, his application for an Amex business credit card was denied and, following that, Amex cut the limit on his existing business line of credit to $15,700 from $17,000. A spokeswoman for American Express says that, while the company can't comment on individual accounts, it looks at a number of factors when making credit decisions.

At the same time, issuers are cutting back their promotional deals. In September, American Express dropped one of the more popular offers on its Blue and Blue Cash cards: 4.99 percent on balance transfers for the life of the balance. The cards now offer other balance-transfer promotions, such as 2.99 percent for 12 months or 0 percent for 15 months.

Discover Financial Services, which long had charged a balance-transfer fee of 3 percent but had capped it at $75, removed the cap this month.

Some issuers also are paring their reward programs. Starting next month, for example, American Express will eliminate one of the features on its Delta SkyMiles card that had allowed cardholders to earn double miles for shopping in everyday categories, such as groceries, gasoline and drug stores.

There are some sweeter deals on store credit cards this holiday season. In the past, retailers might have offered 10 percent off your purchase if you signed up for a store card; now they're going to offer discounts of 15 percent to 20 percent, says Curtis Arnold of CardRatings.com, which tracks credit-card offers.

Chase's new monthly fees and higher minimum payments will affect mainly customers who have been carrying large balances on cards with low promotional rates for at least two years, says spokeswoman Stephanie Jacobson.

"The total number of customers is relatively low, but the balances that these customers carry amount to billions of unsecured debt,'' she says. While these customers cannot opt out of the new terms, she says, they can pay off their balances or maintain their current minimum payments in exchange for giving up their promotional rates. A higher rate, however, means that more of a customer's monthly payment goes for interest and less to repay the loan.

In some cases, cardholders might be able to decline the new terms - although they'll typically have to close their account. Citibank will let users opt out of the change in pricing terms and pay down their balances under the old terms, although they will have to close their account when the card expires. Amex cardholders, by contrast, cannot opt out of the new terms.

Opting out can hurt your credit score if you carry a balance on your other cards, says John Ulzheimer, president of consumer education at Credit.com, a financial-services Web site.

Many banks will allow you to set up a monthly auto-pay program for your credit-card bills to avoid late fees or penalty pricing. Another option is to sign up for e-mail or cell phone alerts that will warn you if you're close to your credit limits.