A Credit Card Conundrum

A CREDIT CARD CONUNDRUM Why Credit Card Interest Rates Are Shooting Through the Roof Even though the prime rate established by the Federal Reserve has dropped significantly, credit card companies continue to reject this trend and raise interest rates. Read on to find out why this credit card conundrum is costing consumers. THE NUMBERS DON'T LIE What is the Prime Rate? Despite the Federal Reserve's efforts to keep lending rates low, credit The prime rate is a benchmark card interest rates have risen steadily over the past four years. by which the majority of lenders set their interest rates. It is based on the Federal Reserve's feds fund PRIME RATE CREDIT CARD RATE rate, which is the rate banks pay for overnight loans. CREDIT CARD 1184 9904 2267 9076 How Does it Affect Credit Card Interest Rates? 2007 2008 '09-CURRENT 2009 2010 2011 Traditionally, as the fed lowers the prime rate, lenders follow suit. But the past four years have been quite out of the norm; credit card companies have raised their rates, 7.75% 14.74% 14.65% 3.25% even with the prime rate hovering at 11.58% all time lows. SO, WHY THE SKY-HIGH RATES? HIGH LOW AVERAGE INTEREST RATES BASED ON CARD TYPE In short, lenders view most borrowers today as more of a risk than they did pre-recession. 2007 2008 2009 2010 2011 25.99% But, it's more complicated than that. 23.95% Many are saying the Credit CARD Act of 2009, which places restrictions on BAD CREDIT credit card companies, is causing the inflated interest rates. However, a 12.81% study conducted by Card Hub reveals that it's mostly the unpredictable economic climate affecting the rates. 10.82% IS A 79.9% 18.41% APR LEGAL? INSTANT APPROVAL 15.99% 14.18% It certainly is, as long as the full terms of the card are disclosed. Credit card companies offer these high interest and often low limit cards to subprime borrowers 9.94% who have poor credit and are considered an extreme risk. Last 13.46% BALANCE TRANSFER fall, First Premier Bank offered a 12.78% 11.41% 79.9% APR card to borrowers with $..•$ poor credit but was quickly forced to lower the rate to 49.9% after the majority of takers defaulted. The lesson: buyer beware! 9.54% REWARD 14.74% 14.32% 13.66% A FEW CREDIT CARD TIPS Shop online. The best cards don't always appear in the mail. 11.32% CREDIT DEAL! CASH BACK 1184 9944 2267 876 13.90% 13.13% 13.41% Call the credit card company to negotiate a lower APR. 11.20% LOWERED LOW INTEREST 12.31% 11.41% 11.18% %↑ Check your credit score before applying if in doubt. 10.25% CREDIT SCORE 15.45% AIRLINE ??? 15.08% 14.33% Cashback vs. Rewards? Pick what's right for you. 11.60% OR 16.74% BUSINESS Try to use less than 30% of your credit limit. 13.95% 12.91% 1184 9944 2267 9876 9.69% STUDENT 17.88% 13.42% A DEGREE OF SUCCESS: Student credit cards are the only cards that have seen 13.31% a steady decline in rates. SOURCES: federalreserve.gov • bankrate.com • creditcards.com education.cardhub.com • wsjprimerate.us credit sesame BY: www.creditsesame.com