Rate Changes FAQ
Top Questions
What factors could cause interest rates to increase or decrease?
The Federal Reserve (The Fed), which is the central bank of the United States, changes interest rates in response to current economic conditions. These rate changes can directly or indirectly affect interest rates on mortgages, consumer loans and credit cards. The Fed may increase interest rates for many reasons, including to try to slow down the economy in an elevated inflationary environment.
How are BECU rates set?
We have a team that actively monitors and sets our deposit and loan rates. They consider many factors, including:
- Maintaining a sustainable balance of costs.
- Returning profits to our members.
- Maintaining competitive offerings.
When the Fed changes rates, our team considers how the change could impact these and other factors.
What factors could cause BECU to increase rates?
As a member-owned financial cooperative, the safety and soundness of the credit union is our highest priority. As a not-for-profit credit union, we return profits to members in the form of better rates, fewer fees, and more financial services. Because we don't charge many fees, we must be diligent about our rates to ensure income is at a sustainable level to pay for BECU operations. One way that BECU earns income is from interest we receive on loans and credit cards, but those earnings are offset by what is paid out to members with interest-bearing deposit accounts.
What loan types are affected by changes to the prime rate?
Loans with an annual percentage rate (APR) based directly on the prime rate include:
- Home equity lines of credit (HELOCs).
- Credit cards.
- Business lines of credit (secured and unsecured).
The variable interest rates on these loans are impacted by changes to the prime rate. If you have a HELOC, your monthly payment will change when the prime rate changes. If you are interested in learning about fixing the rate on your HELOC account, visit our Fixed-Rate Advance page.
How are other loan rates determined?
Longer-term loans such as mortgage, auto, personal and RV loans are based heavily on market conditions, as well as on the federal funds rate.
Why might BECU increase or decrease rates differently from other banks and credit unions?
Every financial institution has different factors to consider and methods they use to determine interest rates. For example, an institution's operating model (e.g., number of locations, services offered, online-only versus traditional branch locations, etc.) and the costs and revenue associated with that model factor into all interest rate determinations.
Other variables considered when setting rates could include:
- The need to balance income and expenses.
- Competitive financial environment (bank/credit union rates).
- Organizational objectives (return to member, growth).
- Timeline for acting upon market changes.
- Operational costs (e.g., size of the organization, branch network, salaries/benefits, ATMs, digital services, etc.).
How is my variable annual percentage rate (APR) determined?
Financial institutions like BECU calculate variable APR by adding a margin percentage to the current published prime rate. Variable APRs are subject to change monthly as the published prime rate changes.
Could BECU lower my loan or credit card APR in the future?
Yes. BECU is committed to offering you the best rate possible based on your credit score. Periodically, we evaluate the credit rating of every member who has a BECU credit card, personal line of credit, personal loan, home improvement loan, auto loan, boat loan or RV loan. If you have improved your credit score sufficiently, made timely payments and kept your account in good standing, you may automatically receive a better rate.
With a reprice, your rate cannot drop below the lowest current published rate. Loan products available for this benefit may change at any time, the reprice program may end at any time, and BECU may not be able to lower your rate with each evaluation.
Learn more about the tools, resources and services BECU offers to help you improve your financial health.
Could the APR on my variable-rate loan decrease?
Yes, if the prime rate goes down, your APR could decrease.
Why stay with BECU if I can get a better rate elsewhere?
BECU is committed to offering competitive interest rates and low fees while also ensuring that the products, services and programs we offer remain sustainable in the long term for the benefit of our membership. We are always evaluating and balancing these objectives in the best interest of our members' financial well-being.
Should I keep my BECU credit card if the rate increases?
BECU's rates are competitive when compared to those offered by card issuers. BECU credit cards also offer great benefits, including:
- No annual fee for low rate and cash back cards.
- The same rate for purchases, cash advances and balance transfers.
- No foreign transaction fees.
- Convenient monthly eStatements delivered directly to Online Banking.
- Easy, anytime payments in Online Banking or the mobile app.
Learn more about the benefits that come with BECU Low Rate and Cash Back credit cards.
The federal funds rate is set by the Federal Reserve (The Fed), which is the central bank of the United States. This is the interest rate at which financial institutions borrow and lend to one another. The federal funds rate is not the rate consumers pay, but changes to it affect consumer borrowing and saving rates, some of which are based on the prime rate.
The prime rate is the best, lowest possible rate that financial institutions offer for consumer loans, especially short-term loans. When the Fed raises or lowers the federal funds rate, the prime rate changes in response, which typically affects the variable loan rates BECU and other financial institutions offer.
A fixed rate typically does not change during the entire loan term. The rate is set when the loan is established. Fixed-rate monthly loan payment amounts are consistent and predictable.
A variable rate may change when the prime rate changes. This is different from a fixed rate, which typically remains the same through the entire loan term. Variable rates are calculated by adding a margin percentage to the current prime rate. When the Fed increases or decreases the federal funds rate, it impacts the rates offered for credit cards and some types of loans.
A margin is the number of percentage points that financial institutions like BECU add to the prime rate to calculate the variable interest rate. For example, if the prime rate is 8.50% and the margin is 5.74%, the variable rate is 14.24%.
A protected balance is the amount owed that will remain at the previous variable rate when a rate increase is applied to an account. The protected balance consists of transactions posted to the account before the effective date of the rate change. All transactions posted on or after the effective date are subject to the new variable rate.