The Federal Open Market Committee chopped the benchmark federal funds target rate at least 75 basis points. As a result, the prime rate will sink to a low not seen since the 1950s.
cards are tied to the movement
of the prime rate. A lower prime
rate could spell good news for
credit card shoppers. "Anytime
the Fed takes a cut like that,
it should have a positive effect
on the advertised rates for
variable-rate cards," says Bill
Hardekopf, CEO of LowCards.com.
While some rates could come down on variable-rate card offers, existing variable-rate cardholders may or may not see their rate decrease. It depends on your credit and the terms of your account, as well as how the bank is managing its card portfolio. "I would suspect that the vast majority of folks out there are not going to see the benefit. You're still going to see a significant number of consumers that will benefit, but I think most won't," says Curtis Arnold, founder of CardRatings.com and author of "How You Can Profit from Credit Cards."
Arnold says that if your card is still pegged to the prime rate, if it doesn't have a floor and if the issuer hasn't switched you to a fixed-rate product, then you might see your APR decrease. He cautions, however, that any rate decrease may be short-lived if your risk changes. Banks are lowering limits, raising rates, closing accounts and applying fees to those deemed high risk or unprofitable.