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Tomorrow will mark a turning point in credit card pricing if the Feds decide to bump up short-term interest rates by 25 bps (0.25%) or 50 bps (0.50%). It is likely there will be two rate increases before the fall election followed by three or four monthly increases in the first half of 2005. After holding at 6.00% for twenty months, the prime rate moved from 6.00% to 6.25% in April 1994. In less than one year the Feds raised short-term interest rates by 300 bps in six steps: 25 bps; 50 bps; 50 bps; 25 bps; 75 bps; and 50 bps. If the Feds were to drive rates up by 300 bps over the next year, then penalty APRs would be driven above the 30% level, under current variable rate formulas. Standard purchase interest rates would likely rise more than 200 bps over current levels.

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|_. RATE CHANGE DATES |
|_. June 30 |
|_. August 10 |
|_. September 21 |
|_. November 10 |
|_. December 14 |
|_. February 2 |
|_. March 22 |
|_. May 3 |
|_. Source: Federal Reserve |

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