topic Re: Store Card Interest Rate Hikes in Credit Cards

Store Card Interest Rate Hikes

MASTERNC — Mon, 27 Sep 2021 13:46:19 GMT

Strangely, I have received two notifications in the past two months from store cards (Brooks Brothers/Citi and Kohl's/Cap One) that the margin above the Prime Rate is being increased (i.e. they're hiking interest rates for non-credit reasons). The last time I saw hikes like this was around the 2008 credit crisis, so it makes me wonder if there is more risk in the market than what we're hearing (even though all the pandemic-related defaults feared initially never materialized). Either that or the banks don't want to wait for rate hikes to make up for rates being so low for so long (i.e. not making as much interest income).

I pay my cards in full, but it is never fun to see rates increase for reasons not related to you (other than the Prime Rate changing). Anyone else noticing this?

Re: Store Card Interest Rate Hikes

RASULL12 — Mon, 27 Sep 2021 15:44:24 GMT

I just got a letter from Nordstrom Card Services/TD Bank that they are increasing the rate to 26.xx% an increase of 4%. This is for the store card version.

Re: Store Card Interest Rate Hikes

FinStar — Mon, 27 Sep 2021 15:53:12 GMT

This would be no different than when rates were increased back in 2009 (and other years) for store-specific accounts as well as standard credit cards. If folks are of the PIF discipline (at least most folks on these boards have reported), then the rates are a non-event

Re: Store Card Interest Rate Hikes

Gollum — Tue, 28 Sep 2021 12:15:14 GMT

@MASTERNC wrote:
Strangely, I have received two notifications in the past two months from store cards (Brooks Brothers/Citi and Kohl's/Cap One) that the margin above the Prime Rate is being increased (i.e. they're hiking interest rates for non-credit reasons). The last time I saw hikes like this was around the 2008 credit crisis, so it makes me wonder if there is more risk in the market than what we're hearing (even though all the pandemic-related defaults feared initially never materialized). Either that or the banks don't want to wait for rate hikes to make up for rates being so low for so long (i.e. not making as much interest income).

I pay my cards in full, but it is never fun to see rates increase for reasons not related to you (other than the Prime Rate changing). Anyone else noticing this?

Inflation is above the Fed's target rate of 2%. The Fed recently "signalled" that they will be ending "quantitative easing" and will be raising interest rates. Everyone knows (or should know) that interest rate increases are coming. Those store cards apparently have competent people in management.

Mod cut -- not here, please @Gollum. Please be mindful of the TOS and the 5 Things We Don't Talk About.

Re: Store Card Interest Rate Hikes

Anonymous — Tue, 28 Sep 2021 12:02:14 GMT

I never pay attention to the rate hikes as I pay cards in full each month. However, I carry a balance on the Home Depot card since it is always 0% for a year. If I was to not have the 0% the rate is something outlandish. But I always pay them off over a three month period. I do not like to owe anyone money.

Thanks

Mark

Re: Store Card Interest Rate Hikes

MASTERNC — Tue, 28 Sep 2021 12:46:16 GMT

@Gollum wrote:
@MASTERNC wrote:
Strangely, I have received two notifications in the past two months from store cards (Brooks Brothers/Citi and Kohl's/Cap One) that the margin above the Prime Rate is being increased (i.e. they're hiking interest rates for non-credit reasons). The last time I saw hikes like this was around the 2008 credit crisis, so it makes me wonder if there is more risk in the market than what we're hearing (even though all the pandemic-related defaults feared initially never materialized). Either that or the banks don't want to wait for rate hikes to make up for rates being so low for so long (i.e. not making as much interest income).

I pay my cards in full, but it is never fun to see rates increase for reasons not related to you (other than the Prime Rate changing). Anyone else noticing this?
Inflation is above the Fed's target rate of 2%. The Fed recently "signalled" that they will be ending "quantitative easing" and will be raising interest rates. Everyone knows (or should know) that interest rate increases are coming. Those store cards apparently have competent people in management.

Mod cut -- not here, please @Gollum. Please be mindful of the TOS and the 5 Things We Don't Talk About.

I think there are two components here. Sounds like what you are referring to is the Prime Rate, which will increase as the Fed raises rates. This is the margin above Prime that is increasing, so it is independent of Fed action. Inflation would normally lead to the Fed to raise rates. It's possible banks are increasing the margin because of inflation, but the margin is normally risk-based IIRC.

Re: Store Card Interest Rate Hikes

CreditCuriosity — Tue, 28 Sep 2021 13:06:12 GMT

Yes welcome to inflation or trying to get it under control. It will be interesting to see what transpires in the coming months as the last 4 days the 10 year treasuries are rocketing since the Feds speech last week. Be interesting to see the jobs report this coming friday being the 1st friday of a new month to see if they change their tone being the feds or keep with their 2022 time line of tapering. Stinks for me as still can't lock in on mortgage for another month or two so I just see the $ going up on my interest rate for home. Free money has been around way to long even though was hoping it would hold around a bit longer.

Re: Store Card Interest Rate Hikes

Gollum — Wed, 29 Sep 2021 09:25:41 GMT

@MASTERNC wrote:
It's possible banks are increasing the margin because of inflation, but the margin is normally risk-based IIRC.

Banks / credit unions / lenders can increase the margin at any time, according to their own individual strategies.