Before the current economic crisis began, one credit card agency stated that whenever there are interest rates cuts initiated by the Federal Reserve, it is automatically passed on to the consumer.
Unfortunately, this is not the case today. As a matter of fact, the banks have been more reluctant than ever to decrease interest rates for consumers. One credit card company sent a notice along with the bill stating that they have changed their minimum payment collection. To wit, they are now charging “1% of the balance, plus new interest, and late fees if applicable.”
They have also raised the cash advance fee to 3%. In addition, they have added a caveat to this increase stating that if the consumer wishes to decline this new billing payment, they can close their account.
According to an article in the Washington Post, “Card companies say they are exercising their right to protect themselves from risky borrowers and market conditions.”
The article goes on to say that “Consumer advocates and analysts worry that higher interest rates will make it more difficult for borrowers to pay down their debt, which could slow consumer spending and further weaken the economy.”
Even if the Federal Reserve cuts interest rates more than it already has, the rate on credit cards has been reduced to less than one percent. What does this mean to the average credit card user? The result is negligible, especially if the interest rate is already high and you have a substantial balance due.
With approximately 119 more banks requesting money from the Federal Reserve Rescue Plan, together with recent news that Citibank is laying off 50,000 employees, and with American Express having officially become a banking institution, it may be necessary to contact your credit card company to determine if you can reduce the interest rate on your card.
It may also be a good time to inquire if they are imposing any additional changes to the fees on your account. If they are and you feel you cannot pay the impending charges, you may want to consider closing your account.
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