Consumer Payment Card News

Sweet! Sweet!

The stunning Fed interest rate cut of 75 basis points yesterday is very good news for credit cardholders as the prime rate is being pushed down to 5.25%. 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 the rate decision. Since dropping from 8.25% in September, the Fed’s action will reduce credit card interest costs by more than $15 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 $200 per year while those carry balances around $10,000 will save around $300 per year. Americans owed about $775 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 15.49%.

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