topic Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards? in Credit Cards

Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

galahad15 — Thu, 15 Dec 2016 17:41:44 GMT

Didn't see an existing thread mentioning this new development from the other day, so decided to create this new one: was j/c, what are your thoughts (if any) on the Fed's recent 0.25% APR increase for all variable-rate credit cards? Plus the fact the Fed is said to be planning up to 3 more rate hikes, in 2017?

Assuming all of the rate hikes are each 0.25%, 0.25 x 3 = 0.75%, by the end of 2017. If some of the future rate hikes end up being higher than 0.25%, we could get up to a total 1% increase or more, for variable-rate cards.

I know that APR doesn't really concern some posters since they may always PIF and so APR doesn't affect them regardless, but I have always thought that a card's go-to interest rate was a strong indicator of how highly a bank values you as a potential customer -- the lower the rate, the more valuable of a customer you are to them? And so I guess a related question would be, even if you PIF, would you still be happy with your card, if the interest rate was approaching say 30%+?

In any event, all but one of my 4 core go-to and everyday cards have fixed-rate APRs. Aside from the CUs that offer fixed-rate cards, do you think we might ever see a resurgence or a comeback of more bank-offered, fixed-APR cards, if rates were to go significantly higher by the end of 2017?

ETA: edits/adds

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

kdm31091 — Thu, 15 Dec 2016 17:43:13 GMT

I don't really find an 0.25% increase to be a big deal. If you were actually carrying a balance and paying interest, 0.25% more is going to be pretty neglible. Even 1% more isn't huge.

Sure, it sucks seeing rates go up, but if it does something good for the economy in the end (who knows), then it's for the greater good.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

happypill — Thu, 15 Dec 2016 17:56:30 GMT

If you PIF, why would it matter what your APR is? While I can agree it might make sense to have one low APR card for emergencies (having actual savings way way better, but that's a separate discussion), actual benefits a card offers are much more important for people who PIF. Now if you regularly carry balances across many cards then APR would obviously be a major consideration but even then, low adjustable or promo APRs are so much more valuable. It's only if you plan to carry a very big balance for a very long time where a fixed APR would be a valuable benefit.

I know that one of my cards offers a 10.25% APR (also happens to be my favorite rewards card but that's unusual). Other than that, I have exactly zero idea what APR is on any of my other cards. APR increase is just such a non-issue for CCs.

Now, if you're talking about mortgage rates (much bigger amounts, much longer terms, leverage, etc.) then yes .25% could mean a lot and if they really do increase 3 times next year that could have a huge impact. For for CC users who PIF? Total non-issue.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

galahad15 — Thu, 15 Dec 2016 18:54:04 GMT

IIRC, only 1-2 of my existing cards are still carrying a non-promo, longer-term balance. Everything else is currently under a 0% promo that will be PIF by the promo exp. date, or is already PIF. The one I can think of off the top of my head that is carrying a go-to APR balance of less than $1k is my FNBO Amex card, with a present APR of 6.75% V (6.50% V prior to the recent rate hike). Despite the fact that nearly almost all of my cards are PIF atm, I still care about the go-to interest rate IME, which is why with some of my latest card collection additions, I have acquired cards with low, fixed APRs. I know that cc issuers can RJ a fixed interest rate or change it to a variable rate, but again that's kinda also why I have 3 low-APR, fixed-rate cards now: RJ or switch to variable 1-2 of them, I still have a third left over. They could even remove the fixed rate on or make variable all 3, and I would still have the low, variable-rate FNBO card that is going to most likely take years to go above 10%, allowing me plenty of time to search for another fixed-rate card in the process

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Thu, 15 Dec 2016 18:56:36 GMT

@galahad15 wrote:
Didn't see an existing thread mentioning this new development from the other day, so decided to create this new one: was j/c, what are your thoughts (if any) on the Fed's recent 0.25% APR increase for all variable-rate credit cards? Plus the fact the Fed is said to be planning up to 3 more rate hikes, in 2017?

Assuming all of the rate hikes are each 0.25%, 0.25 x 3 = 0.75%, by the end of 2017. If some of the future rate hikes end up being higher than 0.25%, we could get up to a total 1% increase or more, for variable-rate cards.

I know that APR doesn't really concern some posters since they may always PIF and so APR doesn't affect them regardless, but I have always thought that a card's go-to interest rate was a strong indicator of how highly a bank values you as a potential customer -- the lower the rate, the more valuable of a customer you are to them? And so I guess a related question would be, even if you PIF, would you still be happy with your card, if the interest rate was approaching say 30%+?

In any event, all but one of my 4 core go-to and everyday cards have fixed-rate APRs. Aside from the CUs that offer fixed-rate cards, do you think we might ever see a resurgence or a comeback of more bank-offered, fixed-APR cards, if rates were to go significantly higher by the end of 2017?

ETA: edits/adds

When I heard the announcement, I thought of you! I'll be very interested to see if there is movement in your fixed rate cards APR, especially if all the rate hikes happen next year. As we have discussed, at least on paper nothing prevents fixed rate cards pushing up the rate (after the first year), question is whether they will

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

NRB525 — Thu, 15 Dec 2016 20:12:58 GMT

The balances I carry are either on 0% BT where I've paid a fee for the time period, or on two remaining Forever rate low APR cards.

It will be interesting how this affects my SPG, where AMEX just started another Holiday Rate. I'll be carrying a couple thousand on that for a few months, starting rate is 6.99% but I expect that to inch up on the next statement.

As as long as Discover and PenFed Promise continue to offer their no-BT Fee 4.99% rates, that's an easy outlet to pay down a larger balance from a rewards card that likely will be seeing rate increases (and are already too high to consider triggering interest even today).

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Thu, 15 Dec 2016 20:17:20 GMT

I never carry a balance so I personally don't care. But, like previously said, the rate hike isn't huge so it shouldn't hurt others too bad that do carry a balance.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Thu, 15 Dec 2016 20:33:42 GMT

A 1% increase will be somewhat painful for those with ARMs, especially those that borrowed the max they were "qualified" for.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

CreditCuriosity — Thu, 15 Dec 2016 20:40:35 GMT

Hoping for a 1% increase by end of next year.. Rates have been way to low for to long. I don't carry balances. I feel bad for the retirees and such that havent made jack off their savings for how many years now? Just my 2 cents. 1% is nothing in the CC grand scheme of things, other things it will impact possibly more, but still believe rates need to increase 1% by end of next year and hopefully a bit more after that.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Thu, 15 Dec 2016 21:24:07 GMT

@CreditCuriousity wrote:
Hoping for a 1% increase by end of next year.. Rates have been way to low for to long. I don't carry balances. I feel bad for the retirees and such that havent made jack off their savings for how many years now? Just my 2 cents. 1% is nothing in the CC grand scheme of things, other things it will impact possibly more, but still believe rates need to increase 1% by end of next year and hopefully a bit more after that.

But this rate increase most likely won't affect savings accounts. It'd be great to see savings and CD rates go up but this is not likely to happen, at least the banks aren't required to raise their rates on deposit accounts.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

happypill — Thu, 15 Dec 2016 21:46:18 GMT

@CreditCuriousity wrote:
Hoping for a 1% increase by end of next year.. Rates have been way to low for to long. I don't carry balances. I feel bad for the retirees and such that havent made jack off their savings for how many years now? Just my 2 cents. 1% is nothing in the CC grand scheme of things, other things it will impact possibly more, but still believe rates need to increase 1% by end of next year and hopefully a bit more after that.

Yes, I think the current trend in retirement invesment advice is that retirees shouldn't shift comleted over to savings or fixed income once they retire. People are living a lot longer (I think the average 65 year-old will live 20+ years), so if your investment horizon is 20+ years, you need to stay in the market to keep up with inflation. You definitely want to reduce risk as you get closer to or ender retirement, but if you stash it all in savings you end up with the opposite risk, that your money won't keep up with inflation.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Thu, 15 Dec 2016 22:03:35 GMT

Galahad15 I totally thought of you the moment I saw this news. It was very upsetting. I know for some people its not a big deal but for us it sure is! Of course we don't pay much interest, or much in the form of fees. Its just the point that we have it there, should we need it.

After recently being approved for a small bank visa card at 7.5% I certainly hope they get it switched over to fixed from variable before the end of this year or next....sigh....

I was only aware of the 0.25% increase starting Jan 1. So they are saying now they may potentially do another 3 more MID YEAR???? Has that ever happened that the rate is hiked mid year??????

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Fri, 16 Dec 2016 00:30:09 GMT

@Anonymous wrote:

I was only aware of the 0.25% increase starting Jan 1. So they are saying now they may potentially do another 3 more MID YEAR???? Has that ever happened that the rate is hiked mid year??????

All the time. The FOMC meets every 6 weeks to decide if they should adjust the fed funds rate.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Fri, 16 Dec 2016 01:23:04 GMT

Thanks for the information galahad15.

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

galahad15 — Fri, 16 Dec 2016 16:25:12 GMT

@Anonymous wrote:
Galahad15 I totally thought of you the moment I saw this news. It was very upsetting. I know for some people its not a big deal but for us it sure is! Of course we don't pay much interest, or much in the form of fees. Its just the point that we have it there, should we need it.

After recently being approved for a small bank visa card at 7.5% I certainly hope they get it switched over to fixed from variable before the end of this year or next....sigh....

I was only aware of the 0.25% increase starting Jan 1. So they are saying now they may potentially do another 3 more MID YEAR???? Has that ever happened that the rate is hiked mid year??????

Hi there jfriend, best of luck and all kind wishes, for you to be able to get your currently-variable 7.5% card switched to a fixed rate, before the next rate hike.

As far as I am aware, b/c the Fed didn't increase rates as much as originally planned earlier this year, now that the economy has picked up, they want to raise rates faster to prevent the economy from overheating, and to keep inflation in check. I had heard that they may consider another rate increase this upcoming Jan., plus up to 2 more rake hites before the end of 2017, although they didn't specify when the Fed would meet of the rate hike decision for the other 2 expected hikes.

ETA: accidental typo corrections

Re: Thoughts on the Fed's recent 0.25% APR increase for variable-rate credit cards?

Anonymous — Fri, 16 Dec 2016 14:03:38 GMT

@Anonymous wrote:
@Anonymous wrote:

I was only aware of the 0.25% increase starting Jan 1. So they are saying now they may potentially do another 3 more MID YEAR???? Has that ever happened that the rate is hiked mid year??????
All the time. The FOMC meets every 6 weeks to decide if they should adjust the fed funds rate.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135 towards the end lists rate changes over the last many years. In 1980 for example, the rate changed 6 times.

And just to remind how low we are historically:

Interest Rate in the United States averaged 5.83 percent from 1971 until 2016, reaching an all time high of 20 percent in March of 1980 and a record low of 0.25 percent in December of 2008.