Most bank credit cards (72%) are now variable and most (80%) are based on the prime rate. Consumers will see the latest increases in the December and January cardholder statements.
If you're paying more than 8% over the prime rate you should make a New Year's Resolution to take affirmative action to lower your credit card interest costs by shopping for a better deal and by increasing repayment amounts. This newsletter is full of better deals. Rather than paying just 2% on your outstanding balance you should be paying 5% to 10% of the balance each month. The savings difference is staggering if you avoid the minimum payment trap.
The rise in credit card rates has not dampened consumer spending or debt accumulation yet. According to RAM Research's third quarter portfolio survey as published in the November Bankcard Update, cardholders have increased spending by nearly 26% this year and may possibly charge as much as $500 billion for all of 1994. Credit card debt has also increased 12.4% since the first of the year with the biggest increase coming during the summer months. American consumers now owe $259.8 billion on VISA, MasterCard, Discover and Optima.
The fastest growing major issuers are those delivering lower interest rates:First USA ( up 64%), First Union (up 54%), Signet (up 40%), Colonial Natl (up 30%) People's (up 29%), Crestar (up 25%) and Wachovia (up 22%).
