The Cost of Christmas '94 Just Rose
The interest rate that most credit cards charge on unpaid balances varies with the bank prime rate (that's the benchmark rate for many business and consumer loans). The prime jumped three-quarters of a point to 8.5 percent this month, after the Federal Reserve hiked short-term rates across the board.</br></br>Depending on who issued your card, you may owe anywhere from 3.9 percentage points to 11 percentage points over the prime. At the high end, that comes to 19.5 percent on unpaid balances.</br></br>Most cards adjust quarterly, so you normally won't see the higher rate until January. That's just in time to raise the cost of your Christmas bills.</br></br>The cost isn't going to break your back. This year's rise in the prime, since February's 6 percent low, will add $92 annually to shoppers' average $3,900 balance. Consumers in general, however, have paid an extra $4.7 billion in credit costs so far this year, according to Ram Research Corp. in Frederick.</br></br>You also may be paying on a larger revolving balance. Credit card issuers have been raising the amount that customers can charge - and in December many shoppers charge the max. Consumer installment debt (mainly auto loans and charge cards) now accounts for 17.5 percent of Americans' disposable income, up from 16.2 percent last year.