Credit Card Interest Rate Calculation
Post subject: Credit Card Interest Rate Calculation
Guest: Fehercica
Posted: Wed May 18, 2005 9:03 pm
Just received a Notice of Change in Terms from AT&T Universal card about they use of the London Interbank Offered Rate.Is this leagal to use a rate in the USA which is known as Eurodollars trade between banks in London?
At the present rate this would increase my 13.99 to 15.99%
They do give a chance to opt out from this new deal.
Any suggestion?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Credit Card Interest Rate Calculation Change
Posted: Wed May 18, 2005 9:29 pm
It's legal to peg the rate to just about anything. You have the right to keep the current terms--and stop using the card for new purchases from now on.
Try for a better rate elsewhere. I don't know anything about your debt, income, or past credit history--but even without the increase that card was pretty high-priced already.
Guest: mouse
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Credit Card Interest Rate Calculation Change
Posted: Wed May 18, 2005 10:29 pm
I refuse to pay anything over 9.99%
In the past few years I have lowered that maximum to 5.90%
So I wouldn't care if it is 13.99% or 15.99% cause I wouldn't pay either!!!
I'm working real hard on my 4.90% (almost gone)
Next in line is 2.90%
...AND LIBOR IS LEGAL
Guest: Daniel
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sat May 21, 2005 6:19 pm
Yeah seems there is a trend for credit cards to switch to LIBOR.
Historically it moves quicker than the prime rate which is good when rates are falling but of course they are rising at this time making it attractive for the banks to use it.
I do believe that targeted offers will continue at lower than market rates.
The savvy consumer will make sure their credit card portfolio contains enough accounts from the prime banks to take advantage of these offers.
I also believe one should call every once in awhile to see what offers are available.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: rain
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sat May 21, 2005 7:12 pm
There is an increasing trend to use libor. It is perfectly legal because its just a rate. The name starts with "london" but it doesn't mean its a london rate, heh.
Libor tends to be slightly higher than prime. Banks borrow money from each other at this rate, that's why they're trying to justify using it. Obviously its just a method to increase profits.
Guest: hdporter
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sun May 22, 2005 2:32 pm
Daniel's on target in noting that the appeal of a LIBOR based index to banks is that the rate is more sensitive to changes in credit markets. When it's anticipated that rates will increase, LIBOR is one of the first rates to do so.
This is because it fluctuates more freely according to market expectations that the Prime Rate does. The Prime Rate (the predominant market rate charged by banks to their strongest customers), generally responds only to actions by the Federal Reserve (i.e. banks adjust their Prime Rate only after the Fed adjusts the rate charged on transactions with the Fed. Rsv. Bank - "tightens"/"loosens" credit policy)
Consequently, a credit card rate indexed on LIBOR will increase sooner during periods of credit tightening than those indexed on Prime. That's clearly in a bank's favor. The converse isn't true though. While LIBOR will also adjust downward sooner than the Prime, credit card agreements typically stipulate that LIBOR based rates use the highest LIBOR rate in the past 90 days. Thus, the effect of a decline in the LIBOR rate is delayed by 3 months. In most cases, a rate based on Prime will decline sooner than one based on LIBOR.
By the way, LIBOR rates (charged on loans between banks) are generally lower than Prime (charged on unsecured loans between banks and their most credit worthy customers). But this has no impact on which is more favorable as a credit card index. Banks will apply a margin in either case that brings the effective rate to that which the bank deems appropriate for their product. In absence of rate fluctuations, a bank can be expected to target the same rate under either index.
Guest: Fehercica
Posted: Wed May 18, 2005 9:03 pm
Just received a Notice of Change in Terms from AT&T Universal card about they use of the London Interbank Offered Rate.Is this leagal to use a rate in the USA which is known as Eurodollars trade between banks in London?
At the present rate this would increase my 13.99 to 15.99%
They do give a chance to opt out from this new deal.
Any suggestion?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Credit Card Interest Rate Calculation Change
Posted: Wed May 18, 2005 9:29 pm
It's legal to peg the rate to just about anything. You have the right to keep the current terms--and stop using the card for new purchases from now on.
Try for a better rate elsewhere. I don't know anything about your debt, income, or past credit history--but even without the increase that card was pretty high-priced already.
Guest: mouse
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Credit Card Interest Rate Calculation Change
Posted: Wed May 18, 2005 10:29 pm
I refuse to pay anything over 9.99%
In the past few years I have lowered that maximum to 5.90%
So I wouldn't care if it is 13.99% or 15.99% cause I wouldn't pay either!!!
I'm working real hard on my 4.90% (almost gone)
Next in line is 2.90%
...AND LIBOR IS LEGAL
Guest: Daniel
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sat May 21, 2005 6:19 pm
Yeah seems there is a trend for credit cards to switch to LIBOR.
Historically it moves quicker than the prime rate which is good when rates are falling but of course they are rising at this time making it attractive for the banks to use it.
I do believe that targeted offers will continue at lower than market rates.
The savvy consumer will make sure their credit card portfolio contains enough accounts from the prime banks to take advantage of these offers.
I also believe one should call every once in awhile to see what offers are available.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: rain
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sat May 21, 2005 7:12 pm
There is an increasing trend to use libor. It is perfectly legal because its just a rate. The name starts with "london" but it doesn't mean its a london rate, heh.
Libor tends to be slightly higher than prime. Banks borrow money from each other at this rate, that's why they're trying to justify using it. Obviously its just a method to increase profits.
Guest: hdporter
Post subject: Credit Card Interest Rate Calculation Change
Posted: Sun May 22, 2005 2:32 pm
Daniel's on target in noting that the appeal of a LIBOR based index to banks is that the rate is more sensitive to changes in credit markets. When it's anticipated that rates will increase, LIBOR is one of the first rates to do so.
This is because it fluctuates more freely according to market expectations that the Prime Rate does. The Prime Rate (the predominant market rate charged by banks to their strongest customers), generally responds only to actions by the Federal Reserve (i.e. banks adjust their Prime Rate only after the Fed adjusts the rate charged on transactions with the Fed. Rsv. Bank - "tightens"/"loosens" credit policy)
Consequently, a credit card rate indexed on LIBOR will increase sooner during periods of credit tightening than those indexed on Prime. That's clearly in a bank's favor. The converse isn't true though. While LIBOR will also adjust downward sooner than the Prime, credit card agreements typically stipulate that LIBOR based rates use the highest LIBOR rate in the past 90 days. Thus, the effect of a decline in the LIBOR rate is delayed by 3 months. In most cases, a rate based on Prime will decline sooner than one based on LIBOR.
By the way, LIBOR rates (charged on loans between banks) are generally lower than Prime (charged on unsecured loans between banks and their most credit worthy customers). But this has no impact on which is more favorable as a credit card index. Banks will apply a margin in either case that brings the effective rate to that which the bank deems appropriate for their product. In absence of rate fluctuations, a bank can be expected to target the same rate under either index.
posted by CardRatings.com at 3:36 PM
0 Comments:
Post a Comment
<< Home