Consumer Payment Card News

Fed Rate Hike

There is a major consensus this morning the Federal Reserve will hike interest rates Tuesday with a projected 25 basis points increase. While the effects of the rate increase were discounted in the stock market last week the effect on consumer loan rates will begin showing up as early as April 1. Nearly 85% of the nation’s bank credit card issuers now use variable rate pricing and 75% of those rates are based on the prime rate. Therefore a 25 basis point jump in the prime rate will translate into a minimum 15 basis point increase in the average, weighted card interest rate. With average weighted rates now at 17.78%, tomorrow’s Fed action will push the average above 18%, according to the March issue of Bankcard Barometer. Coming just ahead of the start of the second quarter issuers adjusting either monthly and quarterly will be affected. Based on current data, a 25 basis point card rate increase will generate about $500 in additional interest revenue.

Leave A Reply