Consumer Payment Card News

Surprise! Surprise!

Today’s surprise Fed interest rate cut is very good news for credit cardholders as the prime rate is being pushed down to 6.50%, the lowest since August 2005. With a median revolving credit card balance of about $6600 and most credit card rates pegged to the prime rate, the average household will save about $50 over the next twelve months in interest costs due to today’s action. Since dropping from 8.25% in September the Fed action will reduce credit card interest costs by more than $10 billion over the next year. Considering all the rate cuts since last summer, a family with total revolving credit card balances of $6600 will realize a savings of about $115 per year while those carry balances around $10,000 will save around $175 per year. Americans owed about $750 billion on general purpose credit cards at year end 2007. Approximately 87% of all major credit cards carry variable interest rates. Over the past year the average variable rate credit card has dropped from 16.59% to 15.79%.

CREDIT CARD INTEREST RATES
Month Prime Fixed Variable
Jan 07 8.25% 14.72% 16.59%
Feb 07 8.25% 14.74% 16.61%
Mar 07 8.25% 14.74% 16.61%
Apr 07 8.25% 14.88% 16.64%
May 07 8.25% 14.92% 16.65%
Jun 07 8.25% 14.93% 16.65%
Jul 07 8.25% 14.96% 16.69%
Aug 07 8.25% 14.97% 16.70%
Sep 07: 7.75% 14.98% 16.58%
Oct 07: 7.75% 14.99% 16.39%
Nov 07: 7.50% 15.00% 16.29%
Dec 07: 7.25% 15.02% 16.02%
Jan 08: 6.50% 15.03% 15.79%
Source: cardtrak.com (www.cardtrak.com)

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