Why a Low Prime Rate Won't Help You

default vs average rate

I just wanted to comment on your comparison of Wachovia's default rate with the average rate on http://www.indexcreditcards.com/. I don't know where to find a list of default (aka sub-prime) rates, but according to the Consumer Action web site -- http://www.consumer-action.org/news/articles/2008_credit_card_survey/#Topic_09 -- 30% is not out of line with the industry.

I'll agree that 30% is an unreasonable rate to charge anyone, but that's a separate topic. I don't think it was fair to compare that rate to the average of standard rates.

Dave of NC @ Dec 22, 2008 14:01:01 PM

Default Rate

Kim,

If I understand your post correctly, you're talking about the default rate, which is that rate that a credit card issuer would charge you if you were considered in default, i.e., you have your rate jacked up because of missed payments, going over limit, etc. I'm assuming you are not talking about the card's regular APR, since I'm sure you have an excellent credit record and aren't paying 29.99%. Just wanted to clarify because I'm not sure if all readers would understand what the default rate means.

Either way, you are correct that the interest rate cuts from the Fed are having little to no effect on credit card rates right now, at least for new customers. For a while rates were coming down, but when the prime rate got too low, most issuers just changed their rate formulas to keep card rates at an acceptable level for their own needs versus those of their customers.

Justin McHenry of @ Dec 22, 2008 13:44:34 PM

Oh the irony...

Right after I submitted this comment, I checked the mail. Turns out USAA is instituting a mandatory minimum APR for all cardholders. The APR won't drop below 9.9, which is still a pretty sweet deal comparatively speaking.....

Veronica of NY @ Dec 22, 2008 13:32:50 PM