Credit card rates are going back to the future.
Instead of a wide range of rates based on the borrower’s risk profile, credit card companies will move to toward a single-rate system for all their customers, Discover CEO David Nelms told the Salt Lake City Tribune recently.
The Credit Card Accountability, Responsibility and Disclosure Act will benefit some people and hurt others, said Nelms, who was in Utah visiting the company’s largest call center operation Tuesday, in West Valley. For those with good credit, “the ultra-low rates of the past 10 years aren’t going to be available anymore.”
That’s how credit card rates used to work, back in the days before credit scoring. One rate, usually around 18%, for all customers–and folks with bad credit need not apply at all.
In February 2008, I warned that “The credit card party is officially over” as rising defaults and the credit crunch led issuers to start raising rates and lowering credit limits. That trend only accelerated after credit card reform passed. Balance transfer offers have gotten much less generous and rewards programs are about to suffer, as well. (I’ll be writing about that next week for MSN Money.)
All told, it’s a good time to get that credit card debt paid off. If you still have a low rate after Feb. 22, when the last of the CARD Act reforms kick in, you should be able to keep it unless you’re late paying by 60 days. Otherwise, you might want to consider locking in a lower rate with a personal loan from a credit union. With good credit, you could get a three-year loan with a fixed rate around 10%.
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