The LowCards.com Weekly Credit Card Rate Report 12-30-08

The LowCards.com Weekly Credit Card Rate report is based on
our Complete Credit Card Index which tracks the advertised rates
of 1260 credit cards in the United States.

Our index showed that Annual Percentage Rates for credit
cards increased slightly this past week. The average
credit card rate was 11.78% for the 1260 credit cards
that are tracked by LowCards.com, a very slight increase
compared to the 11.75% average for the previous week.
This was the first increase in six weeks.

Here are the averages from the LowCards.com Complete Credit
Card Index for the previous ten weeks:

Dec.30 11.78%
Dec. 23 11.75
Dec. 16 11.77
Dec. 11 11.78
Dec. 4 11.80
Nov. 25 11.98
Nov. 20 12.01
Nov. 13 11.99
Nov. 6 11.95
Oct. 30 12.01
Oct. 23 12.03

The average cash advance rate dropped to 20.58% up from 20.57% last week.

“We just had the Consumer Confidence Index numbers released this
morning and that might start moving interest rates.” said Bill Hardekopf,
CEO of LowCards.com. “The CCI number was at an all-time low
when it was released this morning. In addition, the housing numbers
continue to look bad with home prices down 18% in October. With
this as a backdrop, we think credit card issuers may decrease interest
rates. But we expect there will continue to be a tightening of approval
rates because they are concerned with the credit quality of their
customers.”

The credit cards with the lowest interest rates in the nation this week are:

1. 4.00% Nordstrom Platinum Visa
2. 4.50% Wells Fargo Prime Rate Visa Credit Card
3. 5.00% Fifth Third Bank Platinum Prime MasterCard

The LowCards.com credit card rate report is compiled weekly
using data from 1260 credit cards which are tracked on the
LowCards.com website. The Complete Credit Card index is
available here:
http://www.lowcards.com/CreditCardIndex.aspx

Rates may occasionally change due to the number of cards
being tracked.

Today, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration passed significant regulations for the credit card industry. These regulations will put limits on interest rates, how payments are applied, and restrictions on penalties for subprime cards.

Most consumers will find these new regulations very beneficial. Consumers have been dissatisfied for years about many practices eliminated with today’s reforms. In the past, credit card companies have been able to raise rates “at any time for any reason” with only 15-days’ notice. Unfortunately for consumers, these changes may not go into effect for another 19 months on July 1, 2010.

Here’s how the regulations will affect cardholders:

* Save money in interest payments by paying off highest balances faster. The issuers currently apply any payment above the “minimum” to the balance with the lowest interest rate. This means higher interest payments for cardholders. Regulations will require issuers to apply payment to the highest interest rate or proportionally to all balances.

* Have time to react and adjust to changes in terms and conditions. Currently the issuer can change the terms of your card with a short 15-day notice. The regulations increase the notice to 45 days.

* More time to make a payment. Regulations will require a reasonable time, 21 days, to pay your bill.

* Cardholders will know when to expect a rate increase. Issuers may increase rates at the end of a specified period, providing the rate increase was disclosed at the opening of the account.

These new regulations will prohibit:

* Unfairly computing balances with two-cycle billing

* Unfairly adding security deposits and fees for issuing credit or making it available.

* Excessive fees for sub prime cards. The fee will be capped at 50% of the credit limit and allow cardholders to pay off initial balance over a year. Fees exceeding 25% must be spread over no less than six months, rather than charged as a lump sum.

By eliminating the issuer’s ability to raise rates “at any time for any reason,” these regulations force banks to give up a significant amount of interest revenue; the timing could not be worse for these financial institutions. Many financial institutions will look to make adjustments to their business model. Consumers may see credit card companies raise fees and interest rates to make the most of this time before July 2010.

Banks and financial institutions are expected to respond by:

* Reducing the availability of credit. They may accept fewer application for credit cards. It will be much more difficult for those with poor credit to qualify for a credit card.

* Limit their exposure to risk with lower credit limits and higher interest rates. The banks may have to raise rates for all customers to cover potential losses for risky customers.

* Reduce intro rate offers for balance transfers. In the last six months, several issuers have reduced intro offers from 12 months to six or three months. They are also increasing the rates from 0% to as high as 3.99%. Nearly every issuer charges a 3% balance transfer fee, and most have eliminated the maximum cap for this fee.

Today, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration passed large and significant regulations for the credit card industry. These regulations will put limits on interest rates, how payments are applied and restrictions on penalties for subprime cards.

“These new regulations are great news for most consumers,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “Consumers have complained for years about many of these practices that are being eliminated with today’s reforms. It has always been extremely unfair that credit card companies were able to raise rates ‘at any time for any reason’ with only a 15 day notice. Or how they could apply the payment to the lowest interest rate while milking interest on the highest interest rate for as long as possible. It is just unfortunate that these changes may not go into effect for another 19 months on July 1, 2010.”

How the regulations will affect cardholders:

* Save money in interest payments by paying off highest balances faster. The issuers currently apply any payment above the “minimum” to the balance with the lowest interest rate. This means higher interest payments for cardholders. Regulations will require issuers to apply payment to highest interest rate or proportionally to all balances.

* Have time to react and adjust to changes in terms and conditions. Currently the issuer can change the terms of your card with a short 15-day notice. The regulations increase the notice to 45 days

* More time to make a payment. Regulations will require a reasonable time, 21 days, to pay your bill.

* Cardholders will know when to expect a rate increase. Issuers may increase rates at the end of a specified period, providing the rate increase was disclosed at the opening of the account.

These new regulations also prohibit:

* Unfairly computing balances with two-cycle billing

* Unfairly adding security deposits and fees for issuing credit or making it available.

* Excessive fees for sub prime cards. The fee will be capped at 50% of the credit limit and allow cardholders to pay off initial balance over a year. Fees exceeding 25% must be spread over no less than six months rather than charged as a lump sum.

“By eliminating the issuer’s ability to raise rates at ‘any time for any reason,’ these regulations force banks to give up a lot of interest revenue and the timing couldn’t be worse for these financial institutions. They are going to have to make adjustments to their own business model. I wouldn’t be surprised to see them raise a few fees and interest rates to make the most of this time before July 2010,” says Hardekopf. “People who have recently received a large rate increase are asking if this will be retroactive and benefit them. I don’t think it will be retroactive.”

Expect banks and financial institutions to respond by:

* Reducing the availability of credit. They may accept fewer application for credit cards. It will be much more difficult for those with poor credit to qualify for a credit card.

* Limit their exposure to risk with lower credit limits and higher interest rates. “The banks are saying that they may have to raise rates for everyone to cover potential losses for risky customers,” says Hardekopf.

* Reduce intro rate offers for balance transfers. “In the last six months, we have seen several issuers reduce intro offers from twelve months to six or three months. They are also increasing the rates from 0% to as high as 3.99%,” says Hardekopf. “Nearly every issuer charges a 3% balance transfer fee and most have eliminated the maximum cap for this fee.”

This week, credit cardholders could receive two gifts from the Federal Reserve: another rate cut on Tuesday and credit card regulation on Thursday, when the Fed votes on credit card reform.

Experts say it is a good sign that the Federal Reserve is bringing this for a vote, and it is about time some of these punitive practices are eliminated. These reforms are good for consumers, but credit card reforms have been a very slow process.

The Federal Reserve began discussing reforms in May. The efforts have been prolonged to get to a vote and may take quite some time for any changes to be enacted that would benefit the cardholder.

Any reform will need the approval of the Federal Reserve, the office of Thrift Supervision, and the National Credit Union Administration.

Here are a few of the reforms that may be approved on Thursday:

* Easier to read tables in monthly statements.

* Ban on raising interest rates on existing balances unless the customer was at least 30 days late in paying the minimum.

* Elimination of the universal default policy.

* Elimination of double-cycle billing.

* If payment exceeds the minimum payment, prohibit banks from first applying entire amount to that part of the balance with lowest rates.

While these reforms benefit consumers, cardholders may in turn pay a higher price for them according to the banking industry, experts say. These changes may mean a loss of interest and fee revenue for issuers and financial institutions at a critical time when many of the largest banks are struggling to survive. Issuers warn this may lead to an increase in rates for many cardholders as well as a decrease in credit limits.

Congress and the Federal Reserve are both pursuing changes in credit card practices. The House of Representatives passed H.R. 5244, the Credit Cardholders Bill of Rights, on September 23, 2008. This bill had some similar reforms to the Fed’s proposal. This bill has been sent to the Senate.

The Federal Reserve helps supervise and regulate the U.S. banking system, and one one of its purposes is to protect consumer credit rights. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.

Experts say that if the Federal Reserve does not force reforms with regulations, a Democratic Congress seems ready to step in with legislation.

This week, credit cardholders could receive two gifts from the Federal Reserve: another rate cut on Tuesday and credit card regulation on Thursday, when the Fed votes on credit card reform.

“It is a good sign that the Federal Reserve is bringing this for a vote. Overall, these reforms are good for consumers. It is about time some of these punitive practices are eliminated,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “These credit card reforms have been a very slow process. The Federal Reserve started talking about some of these reforms in May. It has taken this long to get to a vote and may take quite some time for any changes to
be enacted that would benefit the cardholder,”

Any reform will need the approval of the Federal Reserve, the office of Thrift Supervision, and the National Credit Union Administration.

Here are a few of the reforms that may be approved on Thursday:

* Easier to read tables in monthly statements.

* Ban on raising interest rates on existing balances unless the customer was at least 30 days late in paying the minimum.

* Elimination of the universal default policy.

* Elimination of double-cycle billing.

* If payment exceeds the minimum payment, prohibit banks from first applying entire amount to that part of the balance with lowest rates.

While these reforms are good for consumers, cardholders may pay a higher price for them according to the banking industry. These changes may mean a loss of interest and fee revenue for issuers and financial institutions at a critical time when many of the largest banks are struggling to survive. Issuers warn this may lead to an increase in rates for many cardholders as well as a decrease in credit limits.

Congress and the Federal Reserve are both pursuing changes in credit card practices. The House of Representatives passed H.R. 5244, the Credit Cardholders Bill of Rights, on September 23, 2008. This bill had some similar reforms to the Fed’s proposal. This bill has been sent to the Senate.

The Federal Reserve helps supervise and regulate the U.S. banking system. One of its purposes is to protect the credit rights of customers. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.

“If the Federal Reserve doesn’t force reforms with regulations, a Democratic
Congress seems ready to step in with legislation,” says Hardekopf.

Many consumers are looking for ways to save money on their holiday shopping this season. Experts suggest that unused gift cards and credit card rewards may be exactly what you need to buy the gifts for the people on your list, while keeping money in your pocket.

Here are some tips for holiday savings using your gift cards, credit cards and airline miles:

* Use your unused gift cards to purchase presents for others on your list. If you have not used the gift card for yourself by now, you probably will not miss it, and you will help your holiday budget by saving the value of that unused card. This is a good time to look at the fine print of each of your gift cards. If you wait over a year to use your gift card, you may start losing the value through a monthly fee, which is typically $2.50.

* Use reward points for holiday shopping. If you have a reward card, you may have unused points piling up. Redeem these for gift cards or merchandise. For example, with an American Express Starwood Preferred Guest card, you can redeem 2,800 points for a $25 Pottery Barn gift card, a $25 Williams Sonoma card or a $25 Gap card. Discover offers up to double cash rewards when you redeem your points for gift cards from their award partners such as AMC Theaters, Borders, Overstock.com, Bed Bath & Beyond, KB Toys or Macy’s. You can give these gift cards away as gifts or use them to purchase gifts, with no additional cash out of your pocket.

Many cards offer online malls where you can shop with your reward points. Citi ThankYou Network offers a wide variety of merchandise, including movies, books, appliances, gadgets and outdoor grills.

If you are not saving your reward points for something specific, this is good time to use points and save money. Issuers are looking for ways to cut costs and their liabilities, so there is no guarantee that the reward programs will remain the same in the future.

* Take advantage of reward partners to earn extra points. Many issuers have reward partners that offer extra points for purchases made with the card. For example, Target.com offers six points per $1 spent with a Citi card.

* Some frequent flier programs have miles that expire when your account has been inactive for a period of time. Check to see when your frequent flier miles expire; if you don’t have enough miles for a free trip, you may want to use these miles to purchase other merchandise or magazines for someone on your Christmas list.

* Research the company before you buy its gift card. In these tough economic times, some retailers are declaring bankruptcy, making their gift cards worthless. A number of major retailers have declared bankruptcy in 2008 including Circuit City, Mervyn’s, Linens-n-Things, Sharper Image, Mrs. Fields Cookies, Shoe Pavilion, Whitehall Jewelers and Harold’s.

This holiday season, many consumers are looking for ways to save money on their holiday shopping. Unused gift cards and credit card rewards may be exactly what you need to buy the gifts for the people on your list, while keeping money in your pocket.

Here are some tips for holiday savings using your gift cards, credit cards
and airline miles:

* Use your unused gift cards to purchase presents for others on your list. “If you haven’t used the gift card for yourself by now, you aren’t going to miss it, and you will help your holiday budget by saving the value of that unused card,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “This is also a good time to look at the fine print of each of your gift cards. If you wait over a year to use your gift card, you may start losing the value through a monthly fee that is typically $2.50.”

* Use reward points for holiday shopping. If you have a reward card, you may have unused points piling up. Redeem these for gift cards or merchandise. For example, with an American Express Starwood Preferred Guest card, you can redeem 2,800 points for a $25 Pottery Barn gift card, a $25 Williams Sonoma card or a $25 Gap card. Discover offers up to double cash rewards when you redeem your points for gift cards from their award partners such as AMC Theaters, Borders, Overstock.com, Bed Bath & Beyond, KB Toys or Macy’s. You can give these gift cards away as gifts, or use them to purchase gifts, with no additional cash out of your pocket.

Many cards offer online malls where you can shop with your reward points. Citi ThankYou Network offers a wide variety of merchandise, including movies, books, appliances, gadgets, and outdoor grills.

“If you aren’t saving your reward points for something specific, this is good time to use points and save money. Issuers are looking for many ways to cut costs and their liabilities. There is no guarantee that the reward programs will remain the same in the future,” says Hardekopf.

* Take advantage of reward partners to earn extra points. Many issuers have reward partners that offer extra points for purchases made with the card. For example, Target.com offers six points per $1 spent with a Citi card.

* Some frequent flier programs have miles that expire when your account has been inactive for a period of time. “Check to see if your frequent flier miles could expire. If they are about to expire and you don’t have enough miles for a free trip, you may want to use these miles to purchase other merchandise or magazines for someone on your Christmas list,” says Hardekopf.

* Research the company before you buy their gift card. In these tough economic times, some retailers are declaring bankruptcy, making their gift cards worthless. A number of major retailers have declared bankruptcy in 2008 including Circuit City, Mervyn’s, Linens-n-Things, Sharper Image, Mrs. Fields Cookies, Shoe Pavilion, Whitehall Jewelers and Harold’s.

Holiday shopping and New Year’s resolutions typically generate an increased interest in balance transfers for credit cards. This year, many consumers may be disappointed to discover that the days of generous balance transfer offers could be over.

Balance transfer offers were once a competitive edge for credit card issuers; they used these generous offers to lure cardholders from another issuer. The standard offer to almost everyone was 0% for 12 months for balance transfers. They did not charge a fee if the balance transfer was made with the application.

Four significant changes have occurred with balance transfer credit cards.

The first change was that issuers added a balance transfer fee in the last few years. Initially, this was a 3% fee with a $50-$75 maximum. In the past year, many issuers have removed the maximum. Hence, if you transfer $5,000, you will pay a $150 balance transfer fee.

Secondly, the length of the offer is no longer the standard 12 months. The length of the offer may now be based on the applicant’s credit score and may be as short as three months.

Some issuers are limiting the amount of money that a consumer can transfer from one card to another. Because of this, experts say consumers need to lower their expectations on how much they will be able to transfer. Banks are lowering credit limits to reduce their lending risks, so the consumer may only be able to transfer a portion of the balance to a card with a lower rate.

Many introductory rates are also increasing. Some issuers no longer charge the typical 0% intro rate or a low rate for the life of the balance; instead, issuers may charge 2.99-3.99% for three to 12 months before increasing the rate to the standard rate. As an example, American Express dropped its attractive promotional offer this fall for balance transfers on its Blue and Blue Cash cards. It was 4.99% on balance transfers for the life of the balance; it is now 2.99% for 12 months and then the standard rate.

There are some cards that still offer a 0% APR on balance transfers, for example: Capital One Platinum Prestige offers this through October 2009 and Discover More offers this for 12 months.

Here are some examples of typical balance transfer offers that are available with an application for a new card:

* Citi Platinum Select has a tiered system for length of intro rates: six, nine, or 12 months.

* Chase Perfectcard. Depending on the applicant’s credit history, the intro period will be either six months for purchases and balance transfers, or three months for balance transfers only.

* Discover Motiva offers 3.99% intro rate for six or 12 months.

* Jet Blue offers 3.99% intro rate for six months.

* Starwood Preferred Guest–2.9% intro rate for six months.

Consolidating credit card debt onto a card with a lower rate may be very difficult unless a consumer has a very good credit score. If you do need to transfer your balance onto a new card, experts suggest starting with your credit card with the highest rate and transfer as much of that as possible.

According to the recent Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices, about 20% of domestic banks reported having reduced credit limits on existing credit card accounts to prime borrowers. But roughly 60% of banks had lowered limits on existing credit card accounts of nonprime borrowers.

Holiday shopping and New Year’s resolutions typically generate an increased interest in balance transfers for credit cards. This year, many consumers will be disappointed to discover that the days of generous balance transfer offers may be over.

Balance transfer offers were once a competitive edge for credit card issuers and they used these generous offers to lure cardholders from another issuer. The standard offer to almost everyone was 0% for twelve months for balance transfers. They did not charge a fee if the balance transfer was made with the application.

But four significant changes have occurred with balance transfer credit
cards.

The first change was that issuers added a balance transfer fee in the last few years. Initially, this was a 3% fee with a $50-$75 maximum. In the past year, many issuers have removed the maximum. Hence, if you transfer $5,000, you will pay a $150 balance transfer fee.

Secondly, the length of the offer is no longer the standard twelve months. The length of the offer may now based on the applicant’s credit score and may be as short as three months.

Some issuers are limiting the amount of money that a consumer can transfer from one card to another. “Consumers need to lower their expectations on how much they will be able to transfer. Banks are lowering credit limits to reduce their lending risks. This means that you may only be able to transfer a portion of your balance to a card
with a lower rate,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

Finally, many introductory rates are also increasing. Some issuers no longer charge the typical 0% intro rate or a low rate for the life of the balance; instead, issuers may charge 2.99-3.99% for three to twelve months before increasing the rate to the standard rate. As an example, American Express dropped its attractive promotional offer this fall for balance transfers on its Blue and Blue Cash cards. It was 4.99% on balance transfers for the life of the balance; it is now 2.99% for twelve months and then the standard rate.

There are some cards that still offer a 0% APR on balance transfers. Two examples: Capital One Platinum Prestige offers this through October, 2009 and Discover More offers this for twelve months.

Here are some examples of typical balance transfer offers that are available with an application for a new card:

* Citi Platinum Select–Has a tiered system for length of intro rates: six, nine, or twelve months.

* Chase Perfectcard–Depending on the applicant’s credit history, the intro period will be either six months for purchases and balance transfers, or three months for balance transfers only.

* Discover Motiva–3.99% intro rate for six months or twelve months

* Jet Blue–3.99% intro rate for six months

* Starwood Preferred Guest–2.9% intro rate for six months

“Unless you have a very good credit score, consolidating your credit card debt onto a card with a lower rate may be very difficult,” says Hardekopf. “If you do need to transfer your balance onto a new card, start with your credit card with the highest rate and transfer as much of that as possible.”

According to the recent Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices, about 20% of domestic banks reported having reduced credit limits on existing credit card accounts to prime borrowers. But roughly 60% of banks had lowered limits on existing credit card accounts of nonprime borrowers.