Another Rate Cut--Good News for Credit Card Consumers?

The Fed cut the federal funds rate by one-fourth of a percent on Wednesday.The rate is now 2.00%, a decline of 3.25% since September 18, 2007. This keyinterest rate has now declined seven times in seven months, but analysts predict that this is probably the last rate cut in the foreseeable future.

What impact have these cuts had on credit card customers? If you carry abalance of $5,000 and your APR is decreased 3.25%, you will save $162.50 over the course of a year. "Variable rate credit cards must reflect these decreases as they occur.However, there are two factors that could prevent you from fully benefiting from these rate cuts," says Bill Hardekopf, CEO of LowCards.com.

"According to the Terms and Conditions of most credit cards, issuers have the right to change their rates at any time according to market conditions.This gives them the opportunity to raise rates at any time. So your card could show an APR decrease right now but then may be subject to an increasein the future. And this can take place with very little notice.

"Secondly, your card's APR may increase based on what an issuer perceives as increased risk with your specific credit. It could be that you have been late on a recent payment or exceeded your credit limit a couple times in the last 12 months. Perhaps your credit score has declined for some other reason. These are all factors that could cause your APR to increase, in some cases, substantially."

There are some definite tips for a consumer during these times of fluctuating rates. "It is the consumer's responsibility to check the interest rate and the credit limit on your credit cards. Check this every month," says Hardekopf."Stay well below your credit limit so you have room to make charges in case of emergency. If you see your APR increasing and you have been a good customer, call your credit card company, say you have some very attractive offers from competitors and ask for your rate to be lowered."

A consumer can always shop for a new credit card should their rates become too high on the current card. "You are not married to your current credit card for life. While it's not good to change cards on a regular basis, a consumer should consider doing so if their rate is too high. If you have a good credit score and a good payment history, but your rate is currently over 12%, you need to look atother cards with a lower rate."

The LowCards.com Complete Credit Card Index( http://www.lowcards.com/CreditCardIndex.aspx ) is a new tool to help consumers shop for a new card. The Index compares the current APR rates for over 1,300 credit cards that are offered in the United States.

"The Complete Credit Card Index allows consumers to easily compare rates for every known card in the country, so people can compare their own credit card, or an offer that they receive, to all other cards on the market," saysHardekopf.

Using the LowCards.com Complete Credit Card Index, consumers can sort credit cards in six ways: alphabetically, by Purchase APR, Cash Advance APR, IntroAPR, Grace Period, and Annual Fee. A click onto the card link gives full details about the offer and an ability to apply for the card online.

LowCards.com Adds Complete Credit Card Index

Today, LowCards.com introduces a feature that revolutionizes the credit card comparison industry.

The LowCards.com Complete Credit Card Index (http://www.lowcards.com/CreditCardIndex.aspx ) compares the current APR rates for over 1,300 credit cards that are offered in the United States. This is the first time comprehensive credit card data like this has been available in one place.

"Comparing credit card offers can be confusing. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to easily compare rates for every known card in the country. We update the Index on a daily basis to add new cards and to modify the interest rates which are constantly changing," says Bill Hardekopf, CEO of LowCards.com. "The index makes it easy to compare your own credit card, or an offer that you receive, to all other cards on the market. The Index lists every card, from widely advertised cards to novelty cards such as those from your favorite sports team, the Red Hat Society, Eskimo Joe's or the Wizard of Oz credit card."

Consumers can sort credit cards in six ways: alphabetically, by Purchase APR, Cash Advance APR, Intro APR, Grace Period, and Annual Fee. A click onto the card link gives full details about the offer and an ability to apply for the card online.

"Credit card issuers can make any card sound extremely appealing. Consumers need to thoroughly research all the data about a credit card before they apply," says Hardekopf. "With this Index, consumers now have the ultimate tool to uncover the facts about every card offered online and then find the right card for their specific needs and situation. This will help them make a very informed decision."

Revenues from Bank Fees Up 41% in Four Years

Last week, Congress continued its investigation of the credit card industry. This is becoming a tense issue for credit card companies as they defend their use of fees. Despite the public protest and scrutiny, fees are are liable and growing source of revenue for issuers during this tough economic time.

According to a February report in the Wall Street Journal, revenue from fees increased from $17.1 billion in 2006 to $18.1 billion in 2007. "In 2003, the revenue from fees was $12.8 billion. That represents a 41% increase in fee revenue in just four years," says Bill Hardekopf,CEO of LowCards.com. "During this time of lower interest rates and more defaults, fees provide a steady income for issuers."

Fees now account for 39% of the revenue for credit card issuersaccording to RK Hammer, a bank card advisory firm.

One fee that is expanding and receiving attention is the over the limit fee. Several years ago, it was a straightf orward fee--if you went over your credit limit one month, you were charged an over the limit fee. In most cases, your card was declined if your account was over the limit when you tried to make a purchase. Now most issuers will allow you to keep charging even if you are over the limit, and they have expanded the penalty. If you exceed your credit limit, you will pay the fee and might be assessed the default rate that is over 30% for most cards.

This is a steep penalty. For example, if your card has 14% rate and you carry a $5,000 balance, you will pay approximately $700 per year ininterest. If your rate is increased to 30%, you will pay $1500 per year ininterest.

Banks are also expanding the debit card/checking account version ofthe over the limit fee--the overdraft policy. Most banks charge over $30 every time a customer writes a check for more money than exists in the account. Therefore, if you write five bad checks, you are charged $150 in overdraft fees.

Several banks also have an extended overdraft policy: if your account is in an overdraft situation for a period of time (usually six days), you face an additional one-time fee that can range from $30 to $42.

Yet another layer of overdraft fees is being discussed in the banking industry. If a customer is in an overdraft situation for an extended period of time, the customer may also be charged an additional fee for every day that the account is overdrawn. Beginning June 1, Compass Bank, a regional bank, is charging overdrawn customers an additional $7 per day charge from day seven to day thirty.

"If you don't closely monitor your account, and your account is overdrawn,this is going to be a very costly surprise when you get your monthlystatement," says Hardekopf.
Even though Congress and other agencies are investigating the practices of the credit card industry and are expected to push for changes, banks and issuers defend their practices and oppose new regulation. They argue that forced changes could have unintended consequences for consumers such as more expensive credit with higher rates or that it could be more difficult for consumers to get credit.

"The bank fee policies for accounts and credit cards are a bit repressive for those who are struggling to maintain their accounts and keep up with their debt payments. They are the ones who are most likely to have a problem and get penalized with a hefty fee or default rate. However the banks are saying the revenue from these higher rates and fees are keeping costs down for all other consumers," says Hardekopf. "Unfortunately, times are tough for many households right now and more people may soon find themselves caught in this rate and fee trap, but have no other alternative for credit."

What do Airline Mergers Mean for Credit Card Users?

Yesterday, Delta Airlines and Northwest Airlines announced their proposed merger.

Since both have their own credit card reward programs with separate banks, one of these programs will likely change. Delta has a strong relationship with American Express, and the Northwest Airlines WorldPerks card is offered by US
Bank.

"Even though it may take a while to determine the fate of the Delta and Northwest credit cards, we can assume that there will likely only be one card and one issuer for the new company. Either way, some cardholders will probably be left with a cancelled card and will have to make a change," says Bill Hardekopf, CEO of LowCards.com.

"Since Northwest is merging with Delta and the new company will be called Delta, more than likely, American Express will be the credit card issuer for the merged airlines."

If you currently have a WorldPerks card, you should start to consider what card you would want to replace that one. The natural choice would be one of the American Express Cards that award miles on the Delta Frequent Flyer program.

"Some airline industry analysts anticipate at least one or two more mergers in the immediate future. The next one may very well be United and Continental. In this case, both airlines use Chase for their credit card reward programs so
there should not be that much of a problem. Continental also has an agreement with the American Express Membership rewards program. That agreement may not survive a merger."

If you have an airline reward card, this may be a good time to evaluate your card and compare it with other reward cards. Airline reward cards typically have higher interest rates and some charge an annual fee.

"If the airlines reward card is your only reward card, you may consider getting another type of reward card. Booking a flight with frequent flyer miles is frustrating right now. With fewer carriers and less competition, it may be even more difficult to use your miles to book a flight. A great number of miles doesn't help you if you can't get the flight that you want." says Hardekopf. "You may save just as much money with a good hotel rewards card and hotel rooms are usually easier to book. You also can't beat straight cash from a cash back credit card."

Some airline reward cards like Citi PremierPass or CapitalOne No Hassle Miles are not tied to a specific carrier, so you can use them on most airlines. You also have
the flexibility to use the miles for other rewards.

Another good choice is the American Express Starwood Preferred Guest Credit Card. It allows you to get 25,000 miles for every $20,000 you spend and you can deposit those
miles into a number of different airline frequent flyer programs.

If you carry a balance, you should not have an airline reward card. The miles are not worth the extra you pay in interest.

Also take this time to review the miles you have accumulated in your frequent flyer accounts. Miles may expire within 18 months if there has been no activity in your account. The merged airlines may also change their policies and adapt to
the more restrictive policy of the two airlines.