No new action from the Fed on interest rates means not much will change for credit card customers.

Thanks to last month’s interest rate cut, some consumers will enjoy lower financing charges on credit card bills this holiday season.

In November, the Fed cut short-term rates by a half-point, and some consumers will see a similar rate cut in their variable-rate credit card bills in December or January.

However, most variable-rate cards are repriced each quarter, and since the Fed cut rates 11 times in 2001, your card may have already reached the floor, or minimum APR allowed on the card. Once you’ve hit the floor on a credit card, your interest rate won’t drop any lower even when the Fed cuts rates. Last month’s 50 basis point rate cut means as little to you as this month’s lack of action.

About 55 percent of all credit cards are variable-rate cards, and most of them are linked to The Wall Street Journal prime rate, which usually rises and falls at the same pace as the Fed’s rate changes.

Best moves now:
If your card’s interest rate has hit the deck, consider transferring the balance to a card that’s offering a lower rate. If you haven’t owned the card very long, look for a rate cut around the end of the year if your credit is in good standing. The average rate on a standard variable-rate card was 13.60 percent on Dec. 4; the average rate on a standard fixed-rate card was 13.69 percent. Several major card issuers are offering cards with zero-percent introductory rates. Compare credit cards using
Bankrate.com’s credit card search.

— Posted: Dec. 10, 2002