The Fed’s half-point rate cut could mean you’ll see lower financing charges on your variable-rate credit card.

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.

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.

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 13.94 percent on Oct. 30; the average rate on a standard fixed-rate card was 13.64 percent. Several major card issuers are offering cards with zero-percent introductory rates.

Compare credit cards using
Bankrate.com’s credit card search.

— Posted: Nov. 6, 2002