It's Prime Time To Review Your Interest Rates

On September 26, 2018, the Federal Reserve Open Market Committee again raised the federal funds rate. As a result, the Prime Rate will also increase. The Prime Rate is often used to determine rates on consumer lending products such as credit cards or auto loans. If you have a fixed rate, the Prime Rate increase will not impact your existing products. However, new lending products and any existing variable rate products will likely be impacted. 

What does this mean for USAA members? Members with variable rate USAA Bank credit card accounts will see the new rate reflected in their November statements, which may lead to an increase in the minimum payment due. Over time, if the Prime Rate continues to rise, you can also expect to see higher fixed rates for any new loans you take out, such as auto loans or personal loans.

How can you lessen the impact of higher interest rates?

• Pay off credit card balances in full each billing cycle. The interest rate is irrelevant if you never have to pay it.
• Stick to a budget. Those most impacted by an increase in the Prime Rate typically carry a significant amount of variable-rate debt. Tracking income and expenses can help you avoid overextending and getting into a financial bind.
• Look for options to consolidate variable rates into a fixed rate. USAA Bank offers fixed rate personal loans. You can use the Personal Loan Calculator on the page to see if it makes sense for you.
• Consider consolidating variable rate student loans to a fixed rate. For federal student loans, visit the student aid website to learn more about your options. Before making the decision to consolidate, consider any loss of benefits from the original loan. For private student loans, contact your lender to discuss options.
• If you are planning to make a major purchase, such as a vehicle, now may be the time to move. As long as you can afford the payment and other associated costs, such as insurance and gas, then buying before rates increase could save you money.

Rates may be gradually increasing, but they are still far below what we have seen in the past (the record high Prime Rate was 21.5% on December 19, 1980¹). Following sound money management principles can help reduce the impact and alleviate the stress associated with increasing rates. As always, USAA is here to help, so feel free to let us know if you have any questions or comments.

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Subject to credit approval.

Actual monthly payments and any savings from debt consolidation will vary depending on (a) the balance, repayment terms and APR for your line/loan, (b) the balances, repayment terms and APRs of the loans and credit cards you plan to consolidate, and (c) your payment behavior. Federally Guaranteed Student Loans should not be consolidated because you will lose important federal benefits.

Credit cards issued by USAA Savings Bank, other bank products by USAA Federal Savings Bank, both Member FDIC.

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