Latest Fed Cut--Good News for Credit Card Consumers?
Latest Fed Cut--Good News for Credit Card Consumers?
Today, in a move to stimulate lending and spending, the Federal Reserve cut
its key lending rate by half a percentage point, to 1.5%. The Fed's hope is
that this rate cut will encourage lenders to loosen their tight squeeze on
lending and new credit.
The optimistic view is that the rate cut can be good news for consumers if
rates drop for credit cards, automobile loans and business loans. It might
also result in a stabilization in credit card approvals and credit card
limits.
"In the past few months, we have seen a decline in approvals for credit
card applications and a decrease in credit limits. This is the creditor's
way of pulling up the drawbridge to protect themselves from additional risk
and potential defaults," says Bill Hardekopf, CEO of LowCards.com and author
of The Credit Card Guidebook. "Unfortunately, that kind of action penalizes
and rejects some qualified applicants."
The rate cut will benefit some cardholders with variable rates because their
interest rate may drop in the next 30-45 days. However, each and every
cardholder will not see a rate cut.
"There are also opposing forces that can even cause an increase in your
rate, despite the rate cuts," says Hardekopf. "Credit card issuers not only
care about your credit history, but they are now paying much closer
attention to predicting if you will be a credit risk in the future. If they
see that you might be a future credit risk, they can use this as a reason
to increase your rate today."
Other forces that may cause your credit card rate to increase instead of
decrease:
* You are considered a risk if your credit score is low or was recently
lowered.
* You are considered a risk if your balance is close to your credit limit
with this card or other cards--even if it was the the issuer who lowered
your limit and that caused your balance to be closer to your limit.
* In the terms and conditions, many issuers give themselves the right to
change rates at "any time for any reason" or because of market conditions.
* Some issuers state in their terms and conditions that they can increase
rates because of bad economic conditions. "This time of failing banks,
tightened credit markets and higher defaults is probably one of those
times," said Hardekopf.
If your issuer doesn't drop your rate, consumers can call and ask for a
lower rate. If the issuer won't lower your rate, continue building a good
payment history and credit score, then ask again.
LowCards.com ( http://www.lowcards.com ) simplifies the confusion of
shopping for credit cards. It is a free, independent website that helps
consumers easily compare credit cards in a variety of categories such
as lowest rates, rewards, rebates, balance transfers and lowest
introductory rates. It also gives an unbiased ranking and review for
each card. The LowCards.com Complete Credit Card Index
( http://www.lowcards.com/CreditCardIndex.aspx ) is the most
objective and comprehensive resource on the Internet which
allows consumers to compare rates for all 1260 credit cards offered in
this country.
We are happy to help the media with an credit card related inquiries you
may have. We are proud to have been involved in many major articles
about credit cards. You may see our press clippings at
http://www.lowcards.com/press/press.asp . Created by Hampton &
Associates, the company has been analyzing the credit card industry and
supplying objective websites on various consumer expenses for eight
years.
Today, in a move to stimulate lending and spending, the Federal Reserve cut
its key lending rate by half a percentage point, to 1.5%. The Fed's hope is
that this rate cut will encourage lenders to loosen their tight squeeze on
lending and new credit.
The optimistic view is that the rate cut can be good news for consumers if
rates drop for credit cards, automobile loans and business loans. It might
also result in a stabilization in credit card approvals and credit card
limits.
"In the past few months, we have seen a decline in approvals for credit
card applications and a decrease in credit limits. This is the creditor's
way of pulling up the drawbridge to protect themselves from additional risk
and potential defaults," says Bill Hardekopf, CEO of LowCards.com and author
of The Credit Card Guidebook. "Unfortunately, that kind of action penalizes
and rejects some qualified applicants."
The rate cut will benefit some cardholders with variable rates because their
interest rate may drop in the next 30-45 days. However, each and every
cardholder will not see a rate cut.
"There are also opposing forces that can even cause an increase in your
rate, despite the rate cuts," says Hardekopf. "Credit card issuers not only
care about your credit history, but they are now paying much closer
attention to predicting if you will be a credit risk in the future. If they
see that you might be a future credit risk, they can use this as a reason
to increase your rate today."
Other forces that may cause your credit card rate to increase instead of
decrease:
* You are considered a risk if your credit score is low or was recently
lowered.
* You are considered a risk if your balance is close to your credit limit
with this card or other cards--even if it was the the issuer who lowered
your limit and that caused your balance to be closer to your limit.
* In the terms and conditions, many issuers give themselves the right to
change rates at "any time for any reason" or because of market conditions.
* Some issuers state in their terms and conditions that they can increase
rates because of bad economic conditions. "This time of failing banks,
tightened credit markets and higher defaults is probably one of those
times," said Hardekopf.
If your issuer doesn't drop your rate, consumers can call and ask for a
lower rate. If the issuer won't lower your rate, continue building a good
payment history and credit score, then ask again.
LowCards.com ( http://www.lowcards.com ) simplifies the confusion of
shopping for credit cards. It is a free, independent website that helps
consumers easily compare credit cards in a variety of categories such
as lowest rates, rewards, rebates, balance transfers and lowest
introductory rates. It also gives an unbiased ranking and review for
each card. The LowCards.com Complete Credit Card Index
( http://www.lowcards.com/CreditCardIndex.aspx ) is the most
objective and comprehensive resource on the Internet which
allows consumers to compare rates for all 1260 credit cards offered in
this country.
We are happy to help the media with an credit card related inquiries you
may have. We are proud to have been involved in many major articles
about credit cards. You may see our press clippings at
http://www.lowcards.com/press/press.asp . Created by Hampton &
Associates, the company has been analyzing the credit card industry and
supplying objective websites on various consumer expenses for eight
years.
