THE FEDERAL Reserve lowered short-term interest rates last week for the seventh time this year, which raises a question for consumers who carry credit-card balances.
If you're a responsible customer - you make payments on time and keep well below your credit limit - yet are paying a high rate, what are you waiting for? Now is a good time to shop for a lower-rate card if you're paying more than 15 percent, some experts said.
"The rate cuts have helped the already robust competition in the market place," said Robert McKinley, chief executive officer of CardWeb.com, a credit-card tracking firm in Frederick.
As of last week, the average interest on a standard variable-rate card was 14.58 percent - 2.84 percentage points less than a year ago, according to Bankrate.com, an online financial research firm in North Palm Beach, Fla. The average interest on a standard fixed-rate card last week was 14.52 percent, down from 15.8 percent a year earlier.
Unfortunately, not all credit-card rates are falling in step with the prime rate - the rate that banks charge their best customers and a peg for credit-card rates, McKinley said.
Some cards carry a "floor interest rate" - a minimum that will hold, no matter how much the Fed cuts rates. GM MasterCard, the second- most-widely held card, carries a floor rate of 16.9 percent, McKinley said.
Though most cards have variable rates, card issuers have also increased the number of fixed-rate cards during the past 1 1/2 years, he said.
Also, issuers adjust variable-rate cards at different times, some monthly, some quarterly. So it's possible that some cardholders won't feel the benefits of the latest rate cuts until October, said Greg McBride, a financial analyst with Bankrate.com.
"Nonetheless, it's a very competitive marketplace," McKinley said.
Because of that, this might be a good time for consumers to peruse the many card solicitations arriving in their mail boxes these days, he said. Some card issuers are offering 0 percent interest for several months and, in at least one case, into the spring.
As always, read the fine print because terms vary from issuer to issuer. The 0 percent rate, for instance, might apply only to balances transferred to the new card, and cardholders might be assessed a fee for transferring balances.
Consumers who pay off their balances each month don't need to worry about rates. For them, it's important to find a card with a generous grace period and no annual fee, McBride said.
