The Federal Reserve has kept the credit card interest rates unchanged leaving the majority of credit card holders protected against a sudden hike in their annual percentage rates. According to the meeting on August 10, the Federal Reserve yet again left interest rates unchanged thus maintaining the federal funds rate at a range of 0%-0.25%. This decision has kept the prime rate at 3.25%. After this decision has been taken by the Federal Reserve, it is quite obvious that credit card holders will not experience higher borrowing costs in the near future.

However, the latest decision taken by the Federal Reserve will not impact the credit cards as the Central Bank’s monetary policy matters to cardholders. The cardholders will not face any hike in the APR until they make their payments after 60 days of the due date. The credit cards, as they carry variable interest rates which can move up or down based on any small change in the Federal Reserve. This means when finally the Feds will raise the interest rates on credit cards, the cost of credit card, auto loan and other loans will increase. Those cardholders who’ve incurred huge amount of credit card debts can go for a credit clean up because improving your credit will be much easier in this economic condition.

Once the Fed increases its lending rate, borrowers will have to pay more for revolving balances on their credit cards. The reason is that most credit cards nowadays carry a variable interest rate that is tied to the prime rate. This prime rate fluctuates with the Fed funds rate. Thus, any changes in the prime rate change the variable APR that is indexed to it. Such interest rate hikes are done to repress inflation when the economy is heated up. For now, the reason is perhaps the slowing economic recovery and the apprehensions that the US may slip back to recession. Some Federal Open Market Committee (FOMC) members have also suggested that the economy still runs the risk of entering a period of deflation.

With the credit card interest rates remaining unchanged, it is more important to keep your credit records clean. As you will be able to get cards at a reasonable rate, you should always keep your credit report intact so that credit card companies don’t turn down your offers. You can go for credit clean up by making your payments on time, not using too many credit cards and by using your credit card within its limit.

Looking forward, experts are of the opinion that the Feds is unlikely to raise the credit card rates anytime soon. The only increase in pricing would be for those credit card holders who present more of a credit risk.

Author: Diana Perkins

Payday loan interest rates are nothing compared your banks overdraft charges.

If you us  a debit card your bank has probably made an offer recently they don’t want you to refuse. The banks want you to agree to continue with its standard overdraft practices.

The banks are not doing this just to be nice and keep you informed. After many years of complaints from consumers, the Federal Reserve finally came to the decision that some consumers were harmed because banks were routinely allowing purchases or ATM withdrawals that pushed customers into debt by allowing an unauthorized overdraft, and then charging the user for it.

Banks realized that there was big money to be made by blurring the line between debit and credit cards. Debit cards allow you to make payments with your own money, rather than borrowing from the banks.

Now the Federal Reserve has decided consumers are  entitled to know when they are borrowing. Many debit cards used for everyday purchases or withdrawals can incur  overdraft charges that could cost you $35 or more.

If you’re careful type, or quite sure you will only use the overdraft feature once in a while for unexpected expenses, then the overdraft charges may not seem to be such a big deal. These rates being charged by banks are far in excess of rates charged by payday loan companies.
Debit cards are a great way to avoid spending money you don’t have. If you want credit, get a credit card. If you want a loan you should at least be told up front what the charges are.