American credit cardholders will shell an extra $19 in interest charges over the next twelve months as a result of today’s fed rate action. Totally Americans will see interest charges soar by $1.4 billion over the next year. Of the 78 million U.S. households that have at least one credit card, the average balance is now $7,564 and the average interest rate is 17.99%.
For the fourth time in twelve months the Federal Open Market Committee voted to raise interest rates. The FOMC voted today to raise its target for the federal funds rate by 25 basis points to 5.75%. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 5.25%. Banks are expected to raise Prime Rates to 8.75% during the next twenty-four hours.
About 65% of the nation’s credit card issuers adjust rates monthly, while the other half adjust quarterly. This means many cardholders will see this week’s rate hike in their March statements while others will see it in their April statements. A few issuers will even bump up rates this month since the rate change occurred before the issuer’s cut-off date.
As of year-end 1999, American consumers have racked up $462 billion in bank credit card debt and $88 billion in retail (store, gas, etc ) credit card debt.
HOW THE BIG GUYS CHANGE RATES (the top ten bank credit card issuers) ISSUER RATE BASIS ADJUSTMENT DATE Citibank Prime Rate Quarterly BankOne/FUSA Prime Rate Quarterly MBNA Prime Rate Quarterly Discover Prime Rate Monthly Chase Prime Rate Monthly Bank of America Prime Rate Quarterly Capital OneLIBOR Monthly FleetPrime Rate Quarterly HouseholdPrime Rate Monthly ProvidianFixed Rates NA
Source CardWeb.com, Inc.