My credit card rate is now tied to Libor, why the change?

[Timefortruth]

Until now my Visa rate has been set by the Prime Rate plus a set, exorbitant, percentage. Coming soon the rate will be the Libor Rate plus a set, exorbitant, percentage. Why would the bank change the base rate source? Any thoughts?

[4lbs]

1. Could be they reached their borrowing limit on the Federal Rate and are now borrowing from London

banks instead.

Plus, the LIBOR rate is 2x to 4x that of the Fed Rate (depending on the term length), and this allows them to justify the interest rate increase on your CC.

The current Fed Discount Rate is 0.50%. The current LIBOR rate is 1.33% for 3-month, 1.96% for 6-month, and 2.15% for 1-year.

So, they go with the LIBOR rate, and increase your interest rate by, say, 5%. They would actually be increasing interest rate profits by a net 3% or more.

That would be my guess.

[Timefortruth]

2. Interesting. Thanks. nt