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Does Your Card Have an Interest Rate Floor?

Interest rates are near record lows, but many consumers have noticed their credit card rates aren't following suit.

Some have unfortunately experienced skyrocketing rates as credit issuers fight to remain profitable amidst tough economic conditions. Others have managed to escaped rate increases but are confused because their credit cards' interest rates have failed to move in line with the falling prime rate - the index linked to most variable rate loans or lines of credit.

The main reason for this confusion is because variable rate credit cards often incorporate what's known as an interest rate "floor", which is the lowest possible rate available after any introductory period is over for an account.

If your credit card has a "floor" and is tied to the prime rate, it's likely already hit that floor, which means the rate has nowhere to go but up.

on Tue, 2009-09-15 17:00