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The Impact of Interest Rate Floors on Your Credit Card



Last Verified: May 10, 2022

Following the Federal Reserve’s recent decision to lower interest rates, credit card holders across the country celebrated an anticipated reduction in their card interest rates. However, keep in mind a factor many cardholders might overlook: the interest rate floor.

An interest rate floor is a pre-established minimum rate set by card issuers, below which your card’s interest rate cannot fall, regardless of changes in the Federal Reserve’s rates.

This means that even if the Federal Reserve were to further lower interest rates due to economic conditions in the United States, your card’s interest rate will not decrease beyond this point

Rate floors can significantly impact your borrowing decisions. Lower interest rates typically promote borrowing, but a rate floor can eventually diminish this incentive, even if the Federal Reserve dropped its rates to zero – a scenario that is not entirely implausible.

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