When most of us hear "rates are on the rise" in the news we think about mortgage rates. However, recent rate increases have had a more significant impact on credit cards than large loans so far. When the Federal Reserve Board raised interest rates again for the 13th time this December, the prime rate increased to 7.25%. This in turn means that credit card APRs went up about .5% across the board:
The average credit card rate for standard, non-reward credit cards is
currently 12.58%. The average rate for consumer credit cards with
rewards is 13.64%. For consumers with excellent credit, these averages
are 10.07% and 11.38%, respectively. In the last two months, average
rates have risen over a quarter-point (.37%) on standard credit cards
and over a half-point (.54%) on reward cards.
What does this mean to you? These interest rate changes impact both existing and new credit card accounts If you carry a balance on your credit cards, even a small rate increase can have a major impact on your debts. Combined with credit card minimum payments doubling (from 2% to 4%) this January, it looks like carrying credit card debts is going to be a lot more difficult in 2006.
The Fed has raised interest rates 3.75% since June 2004 in an effort to
curb inflation. Analysts expect that these increases will continue over
the next few months.
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