A lot of members are asking how often our credit card rates will change now that our rates are tied to the Prime Rate.

The shift to Prime Rate was in response to legislation passed by Congress to make changes in credit card rates more transparent. This was done primarily to protect consumers from having their rates raised with little warning. Our credit card rates were variable before, which meant they could have changed at any time. We seldom changed our rates because we’ve always wanted to keep our rates low and constant.

The effect of tying VISA rates to the Prime Rate means that changes are dictated by a widely publicized number, which most other loan rates (auto for example) tend to be tied too. This is a fairly consistent rate that over the course of the last ten years has experienced very little movement.

In looking at which index to use, we looked at the volatility of the index over the past 10 years. Prime only moved 6 points, from highest to lowest, over the past 10 years.

We decreased the chance of volatility even more by choosing to use Prime x .50. Movement of this index over the last ten years would have been 3 points, if you take the .5 multiplying factor into consideration.

Additionally, we lowered all rates when we made this change. We lowered our rates by .775%. That means Prime must go up by more than 1.55% for your credit card rate to get back up to what it was before we lowered it.

Shari Storm

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