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In both of the notices that I have received from my two CC issuers, it was explained that the new method for figuring my interest rate is the current prime rate -plus- something called a "spread". The problem is, I can find no explanation on either companies website, nor in the provided mailings that explain just -exactly- how they are arriving at this "spread" figure.
Can one assume that it's based solely on my credit score, or do I need to get cynical that this is an intended "gray area" that CCC's could be taking advantage of?
You can never go wrong with being cynical.
While I'm sure your FICO plays a part, there must be other factors such as how much $$ they need to raise to pay the CEO's million $ bonus.
variable rates are based on a index, the spread is what they add to the to the index to your rate , most card use the prime lending rate published in WSJ
Which is an average of what bank are charging,bankscan charge any the want, but enough banks to buck to system to affect the system so the ptime rate is consistanly 3% than it costs them to borrow the money to you, evenif they don't add a spread , they are making a 3% profit
I'm aware of how the prime rate is determined as part of the overall percentage APR figure. It's the "Spread" portion of the APR that doesnt seem to have any rhyme or reason and is the basis for my original question. If a CC customer has a new variable rate of 18%, and the prime rate for that billing period is 3%, then that means the "spread" is 15%. Is my FICO score being used as the only determinate in calculating that 15%, or am I being charged that 15% because the CCC can charge me anything they want?
@Anonymous wrote:variable rates are based on a index, the spread is what they add to the to the index to your rate , most card use the prime lending rate published in WSJ
Which is an average of what bank are charging,bankscan charge any the want, but enough banks to buck to system to affect the system so the ptime rate is consistanly 3% than it costs them to borrow the money to you, evenif they don't add a spread , they are making a 3% profit