Credit card rates continue to march up. For the third time this year the Federal Open Market Committee voted to raise the federal funds rate to 5.5% and the Federal Reserve Board of Governors approved an increase in the discount rate to 5%. As a result most banks raised their prime lending rates to 8.50%. This week's rate increase will raise costs to both card issuers and cardholders. More than 80% of bank credit cards in the U.S. carry a variable rate structure, with most based on the prime rate. About half of nation's issuers adjust rates monthly, while the other half adjust quarterly. This means many cardholders will see this week's rate hike in their January statements while others will see it in their December statements (if their issuer adjusts monthly). This week's rate increase will generate nearly $1 billion in additional interest charges over the next twelve months. Combined with the two prior rate adjustments this year, consumers will shell out nearly $3 billion more in interest charges between now and next Christmas. For the average household, carrying $6,300 in card debt, a 25 basis point increase in the prime rate will raise annual interest costs by $16 or about $1.25 per month. Currently, interest rates for bank credit cards (VISA, MasterCard, Discover and American Express) stands at 17.39% compared to 16.96%, one year ago. The rate increase is directly related to the Fed action in regard to short-term interest rates. As of mid-year, American consumers have racked up $454 billion in bank credit card debt and $97 billion in retail (store, gas, etc ) credit card debt.

               HOW  THE  BIG  GUYS  CHANGE  RATES
             (the top ten bank credit card issuers)

     ISSUER            RATE  BASIS          ADJUSTMENT  DATE
     Citibank           Prime Rate             Quarterly
     BankOne/FUSA       Prime Rate             Quarterly
     MBNA               Prime Rate             Quarterly
     Discover           Prime Rate             Monthly
     Chase              Prime Rate             Monthly
     Bank of America    Prime Rate             Quarterly
     Capital One        LIBOR                  Monthly
     Fleet              Prime Rate             Quarterly
     Household          Prime Rate             Monthly    
     Providian          Fixed Rates            NA