Rate cuts and credit cards...

[IsambardPrince]

https://finance.yahoo.com/personal-finance/fed-rates-cut-credit-cards-221927805.html

Rate cuts and credit cards...

Yahoo Finance talking about what rate cuts mean for people with credit card debt.

My guess is, not much. Credit card interest rates are not regulated, and haven't been regulated since the Marquette and Smiley decisions (which also gutted regulations about fees, which are also a major profit center now) and banks have grown fat on record profits by more than doubling the average credit card interest rate since the 90s. A lot of that happening in the last 5 years. Don't count on getting that genie back in the bottle. They even went court shopping in Texas to prevent the late fees from going back to what they charged in the late 90s, and that's sticking for now.

They've gotten used to super-prime customers who pay sub-prime interest rates and they don't have to lower anybody's rates at all.

Even if they do, the new rate adjustment would be like prime plus 15-20 points, so a quarter point cut won't do anything noticeable and wouldn't be applied to existing debt, I believe, only new purchases.

I called Discover about all our cards with them and said the rate is too darned high and even though we've never had a balance on those cards, they lowered them by five points each, which is 20 times the rate cut that Yahoo Finance says you MAY get if you wait for the Fed.

So if you don't like your credit card rates, you can talk to the bank and if they won't budge and you think they're too high, you can cut them up and get the trash loan products (29.99 or higher in my opinion, these days) out of your sight.

No idea why the news is even bothering to talk about this. Credit cards are a loan shark in a plastic card. Most people who rack up credit card debt will only ever see the light of day again in bankruptcy.

While many people who get credit cards (78%) have a credit card problem soon, I'm always surprised that nobody just picks up the phone and asks their credit card bank for a rate cut, a hardship program, or whatever they need to make some progress.

No matter what it takes to get out of debt, it's usually not as bad as being in debt. I think some people are too proud to say "I am in trouble."

Lenders get "flexible" even in this environment when a customer calls and asks for a better deal. You should only ask for a hardship program if the other option is a default or bankruptcy or something, but asking for a rate cut is not a hardship program. Sometimes they just give them out to people who ask because the bank will still make a lot of money.

[Windchill92]

TBH I am more worried about my HYSA and future CDs not growing as much due to the cut.

But, would the banks/CUs cut the rates on these as much?

I ask b/c if rates are lowered, more people will want to borrow for xyz and the banks will need more cash available to lend...so a high APY will entice members to keep their deposits with them.
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Also, one justification those with CC debt use is that "only paying the minimum payment every month is cheaper than paying it off".

While true on a 1-, 2-, 3-, ..., N-year scale, the balance still follows you 'till death where it's taken out of the estate or maybe collections before that. I prefer to reject consumerism and have no revolving liabilities that I can't pay within 1 or 2 cycles.

[IsambardPrince]

My bank started cutting CDs yesterday. I figured it would happen soon and had already reinvested almost all of them before it started except some liquid CDs that are really more of a cash buffer to step in and act as an emergency fund.

They didn't lower that rate so I reinvested those yesterday and will keep pulling them and reinvesting every six days until the rate drops for the no penalty and then I can get 11 months starting when the rates drop, but rolling over by taking them out a month early means they can't blindsided me next month and cut the MMSA too and stop me from getting an acceptable rate on my emergency fund for 11 more months.

I've built the CD ladder over again because I still had cash on the side that earned higher rates in the no penalty CD buffer to take from and throw in regular CDs when interest rates were about to fall and now it's too late for the bank to do anything to stop me.