Credit Rates Don't Add Up

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Six times in six months, Alan Greenspan has taken the pruning shears to the nation's interest rates, slashing them to the lowest level in seven years. But while the government's rates have been falling, some credit-card rates have stayed rock solid, and millions want to know why. CBS News Correspondent Lee Cowan reports.

Although the Fed's prime lending rate has dropped nearly 30 percent since January, the average credit-card rate has come down only 6 percent. And for some companies, that's as good as it gets.

Explains Ed Mierzwinski of the U.S. Public Interest Research Group, "Banks have a floor on many of their variable rate cards, although they don't have a ceiling, so they're getting the benefits of the interest-rate cut, but you don't. It's legal. It's just unfair."

Variable-rate cards are supposed to be tied to the government's falling prime rate. But as many as 25 percent of the nation's credit-card companies have set limits on how low they'll go.

  • Bank One's Platinum Visa bottomed out at 15.9 percent.

  • So did First USA's Smart Visa.

  • Wingspan's Platinum Visa halted at 14.4 percent.

  • Wells Fargo's Platinum Visa leveled off at 11.7 percent.
This means that the Fed's last two rate cuts did nothing at all.

Need Debt Trouble Help?
There are several web sites that have resources available to get you back on track to financial health:

myvesta.org

National Foundation For Credit Counseling

Jump Start Coalition

Institute of Consumer Financial Education

Federal Trade Commission 'Back In The Black' Campaign

"In other words," says Robert McKinley of CardWeb.com, "consumers have missed out on about $200-300 million in interest savings.

Credit card companies blame the soft economy. Bankruptcy claims have skyrocketed, the amount of uncollected debt has risen 6 percent, and banks are nervous, leaving lenders looking for a ay to cover their costs.

Is that fair? "Well, it's ultimately a business decision," says Fritz Elmendorf of the Consumer Bankers Association. "Businesses need to ensure their profitability."

The Fed's actions are designed to benefit the economy first, consumers second. But with the possibility of at least one more rate cut on the horizon, there's still time to find the best deal - by reading the smallest print.


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  • CBSNews.com staff CBSNews.com staff

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