Credit card interest rates.....

[DESDallasTX]

Hello Everyone,

Given the worlds ongoing "roller coaster" economy, I have a question regarding variable interest rates.  In January, I was approved for a Visa Signature card with an interest rate of 9.99% (v).  As we are all aware, interest rates have risen in the last several weeks, and my rate is now 10.74% (v).  My question is, despite economic turmoil, does the lender have to honor the original "base rate" (9.99%) for the life of the account (barring default, late payments, etcetera,) or is this rate vulnerable to market fluctuations as well?

For example, If the prime rate decreases down the road, is it possible my card could return to (at the lowest) 9.99%, or can the cards "base" percentage change permanently through no fault of the card holder?

Any insight would be appreciated.....

Thank You!

[CYBERSAM]

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@DESDallasTX wrote:

Hello Everyone,

Given the worlds ongoing "roller coaster" economy, I have a question regarding variable interest rates.  In January, I was approved for a Visa Signature card with an interest rate of 9.99% (v).  As we are all aware, interest rates have risen in the last several weeks, and my rate is now 10.74% (v).  My question is, does the lender have to honor the original "base" rate (9.99%) for the life of the account (barring default, late payments, etcetera,) or is the base rate vulnerable to market fluctuations as well?

Thank You!

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If your CC has "variable interest rates" by definition is going to subject to change!

However there had been some CCs that had fix rates! Not sure any bank offers them anymore.

You mostly can get fix rates on limited special promotions or balance transfers!

[RootDet]

Nope, with a variable interest rate they do not have to honor the old apr. Additionally because it is variable, they do not have to provide notice that the rate increased.  Some laws passed circa 2008 were mostly around fixed apr's, which as noted before, are pretty much dead. I have a fixed APR card from FNBO at 9.99% but I bet they will whack that soon enough at the current trend. In my case they would have to provide a notice about the change since it is a fixed apr. 

[Gollum]

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@DESDallasTX wrote:

Hello Everyone,

Given the worlds ongoing "roller coaster" economy, I have a question regarding variable interest rates.  In January, I was approved for a Visa Signature card with an interest rate of 9.99% (v).  As we are all aware, interest rates have risen in the last several weeks, and my rate is now 10.74% (v).  My question is, despite economic turmoil, does the lender have to honor the original "base rate" (9.99%) for the life of the account (barring default, late payments, etcetera,) or is this rate vulnerable to market fluctuations as well?

For example, If the prime rate decreases down the road, is it possible my card could return to (at the lowest) 9.99%, or can the cards "base" percentage change permanently through no fault of the card holder?

Any insight would be appreciated.....

Thank You!

The Federal Reserve sets the Federal Funds Rate. The Prime Rate is 3% higher than the Federal Funds Rate. The interest rate for variable interest rate loans (credit cards, for example) is based on the Prime Rate: Prime Rate plus a "margin." The "margin" varies depending on the borrower's creditworthiness. To find out what the "margin" is, read the terms of the loan.

[Anonymous]

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@Gollum wrote:

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@DESDallasTX wrote:

Hello Everyone,

Given the worlds ongoing "roller coaster" economy, I have a question regarding variable interest rates.  In January, I was approved for a Visa Signature card with an interest rate of 9.99% (v).  As we are all aware, interest rates have risen in the last several weeks, and my rate is now 10.74% (v).  My question is, despite economic turmoil, does the lender have to honor the original "base rate" (9.99%) for the life of the account (barring default, late payments, etcetera,) or is this rate vulnerable to market fluctuations as well?

For example, If the prime rate decreases down the road, is it possible my card could return to (at the lowest) 9.99%, or can the cards "base" percentage change permanently through no fault of the card holder?

Any insight would be appreciated.....

Thank You!

The Federal Reserve sets the Federal Funds Rate. The Prime Rate is 3% higher than the Federal Funds Rate. The interest rate for variable interest rate loans (credit cards, for example) is based on the Prime Rate: Prime Rate plus a "margin." The "margin" varies depending on the borrower's creditworthiness. To find out what the "margin" is, read the terms of the loan.

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Right, it is the margin that is fixed, not what the OP calls the base, which is just "Prime Rate at the time" + Margin.

Margin can change but only though "fault of the card holder" such as when a penalty APR is invoked for late/non-payment.

[core]

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@Anonymous wrote:

Margin can change but only though "fault of the card holder" such as when a penalty APR is invoked for late/non-payment.

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You're saying that even with proper notice, they can't change the margin on NEW purchases going forward?  That is surprising to me.  Especially given that they routinely change just about everything else on me.  Increase fees, eliminate benefits, nerf rewards, etc.  I never pay interest so I guess I never paid attention.

[Anonymous]

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@core wrote:

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@Anonymous wrote:

Margin can change but only though "fault of the card holder" such as when a penalty APR is invoked for late/non-payment.

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You're saying that even with proper notice, they can't change the margin on NEW purchases going forward?  That is surprising to me.  Especially given that they routinely change just about everything else on me.  Increase fees, eliminate benefits, nerf rewards, etc.  I never pay interest so I guess I never paid attention.

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Sorry, yes with proper notice they can change the margin

[Dadof31978]

you should be focusing on not worrying about this and PIF each month.  If you can't PIF you probably shouldn't be using the card..that's just the hard truth and reality. 

[Zoostation1]

Has the margin over the prime rate increased over the years for prime CCs?  After doing some checking on current rates for prime cards I can't qualify for or (only qualify for the highest rate since I'm rebuilding) I noticed that the best rates are further above the prime rate than the cards I had before financial woes.  Before I ran into serious trouble just over a decade ago 2 of my 3 cards were at prime+5.99 with decent but nothing special scores (low 700s).  Ignoring the recent Fed hikes, are better rewards at the expense of higher rates?  This go around I'm hell bent on not paying interest, so unless it's an emergency I'm not using my cards for anything I can't buy via debit card or cash but still curious about the relative cost of balance carrying in relation to years past.

[Gollum]

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@Zoostation1 wrote:

Has the margin over the prime rate increased over the years for prime CCs?  After doing some checking on current rates for prime cards I can't qualify for or (only qualify for the highest rate since I'm rebuilding) I noticed that the best rates are further above the prime rate than the cards I had before financial woes.  Before I ran into serious trouble just over a decade ago 2 of my 3 cards were at prime+5.99 with decent but nothing special scores (low 700s).  Ignoring the recent Fed hikes, are better rewards at the expense of higher rates?  This go around I'm hell bent on not paying interest, so unless it's an emergency I'm not using my cards for anything I can't buy via debit card or cash but still curious about the relative cost of balance carrying in relation to years past.

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I advise against "ignoring the recent Fed hikes."