Why Do Rate Cuts = Rate Increases?
Over the past few months, the Federal Reserve has repeatedly cut rates. Since these short-term rate cuts directly impact the prime rate, it seems like everyone that carries a credit card balance should benefit. Right?
Well… As it turns out, some card issuers have actually increased rates over the past few months. In fact, the base interest rate on the Chase Freedom Visa has jumped from 14% to 16% over the past six months, and the rate on the Amex Blue Card has increased 0.5% over the same time period.
So what’s the deal? Given the huge mortgage losses that many banks have been suffering, some of them have decided to insulate their bottom line by attempting to increase the profitability of their credit card divisions.
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Many are also speculating that credit cards will be the next subprime mortgage mess. Credit card defaults seem to be a rising trend recently and banks are taking preemptive action. Make your card’s interest not matter by paying off your balance each month if possible.
Comment by PlasticRewards — Apr 23rd 2008 @ 9:07 pmThis is true for all types of loans… including auto loans, student loans, and mortgages… given the “credit crisis” there is less money floating around, IE less to loan, but demand has stayed stagnant… so rates are going up on top of big banks trying to get better returns… a double doozie for the long run…. top that with the low fed funds rate allowing the current cash to circulate very quickly…lock in your 0% rates and fixed rate mortgages now…. inflation is coming quick!
Comment by willyj — Apr 26th 2008 @ 10:29 am