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New Member |
All Hands,
As you are all probably aware, the Feds have lowered the lending rates to an all time low of around .25%, which in turn should lower your revolving credit rates. Well, I just got off the phone with my credit card company, USAA, to inquire if it effected my rate. Keep in mind, that I have been with USAA for over 13 years, and have all my financial stuff with them, and have had the same credit card account for over 10 years, and it is currently the platinum card, which most of you probably have. Here is what I found out; USAA told me that my current rate is 6.9%, in there weird math, it is the prime rate + 2.9%, not sure how they get 6.9%. But that is not why I am writing this. USAA also told me that they are "restructuring" all the accounts to reflect a new "house base rate" of 6.0%. Doesn't sound bad yet, after further clarification, yours and mine new rate will look like this: "house base rate" (6.0%) + 2.9% = 8.9%. I don't know about you guys, but that does not make any sense, the feds lower the rates, and USAA raises our rates, they exist because of us military people, there suppose to be for us. Maybe if we unite, we can stop this, please contact USAA about your account. |
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Lead Moderator, Veterans Issues Forums davem-milcom@cinci.rr.com Founding Member DVG  |
Prime has historically been the rate the banks offered to their best commercial customers, and for many years has been the benchmark used to measure rates for loan products. This is now an average of 3.25%.
Libor or the London Interbank Offer Rate is the rate banks publish for the loans to each other. It is a composite rate that a number of major US and European banks post their interbank rates and the average is LIBOR. Libor has been controversial for two reasons of late - first banks where reporting rates different then they where offering, and second, libor was higher than other rates of recent, and adjustable rate mortgages where tied to the rate, making loans artificially expensive. The 1 month Libor is now .47% and the 3 month is 1.47% The Fed Rate is actually two rates - the interbank rate is the Fed Funds rate, and it is what they should loan to each other on an overnight basis. This is now .25% The Fed Discount rate is the rate National Banks can borrow from the Federal Reserve discount window. It is set every two weeks. This is considered the bank of last resort for banks, and until this fall, most banks considered borrowing from the fed a bad move. Unfortunately, it was the only choice. This is now .5% This is a few of the rates that financial institutions can use to price their loans. Each institution is free to pick the base rate and then adjust it up or down based on the customer and loan type - really the total risk picture. A number of institutions are using a composite of several rates to create a more stable base rate. This has gone on off and on for years. |
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New Member |
That is good info on the process, but still doesn't answer the question for me, as to why USAA or for that matter, other banks would increase an APR for people with good credit, in a state of economic crisis this country is in. I thought the reason for lowering rates is to jump start the economy, not penalize people for having good credit scores. Not to mention, USAA is exclusively for military members and their families. This move by USAA puts them in the same categories as other less attractive financial institutions. There is a reason why military people use banks like USAA and other exclusive military financial institutions, because they are suppose to take care of military members through the use of benefits only available to military members, so I thought. |
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Lead Moderator Finance Forums  |
They are probably doing it in order to hedge their future anticipated losses along with trying to make an extra buck and become more profitable on the bottom line. Both of which are 2 way streets. The short of it is this. Every bank, brokerage, and financial institution out there right now is hedging their bets as good as they can because "these tough economic times" are just the begining. It's more than a guarantee that it's going to get worse and it's going to cut even deeper than some would like to realize. Just last week 30 yr MBS bonds dipped into the negative. That means a guaranteed loss for investors buying those bonds. Revolving credit is both a money maker a major source of losses for any bank. USAA's problem is that their membership was limited for so long to a very narrow segment. They opened it up some and upped their rates and fees on nearly every product they offer. They are no longer the discount firm that they once were. I got a good rate for my car insurance through them but in everything else they quoted me (within the last month) was way out of line with every other quote I had.
As far as how they are determining rates, I saw sub-prime loans that were tied to an interest rate that the board of directors of the lender set monthly. That rate was defaulted to 35% or the maximum allowable by law. |
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New Member |
I'm at 9% with USAA and considering that virtually every other bank out there is at least 11% for their prime customers I can't complain. |
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