How are rates set?
The Federal Reserve (the Fed) is the central banking system of the United States. The Fed sets the interest rate that financial institutions (banks and credit unions) charge each other to borrow money. Financial institutions use the federal interest rate to set the rates they offer their customers. The interest rate on a short-term loan or high-yield cash account will be impacted by the federal interest rate.
Are mortgage rates affected by this, too?
Demand for U.S. Treasury notes and bonds, not the federal interest rate, drives the rates on long-term loans, like fixed-rate mortgages and student loans. Interest rates on bonds are typically lower when the demand is high and higher when the demand is low. The best time to borrow money is when interest rates are low. This is especially true for a fixed-rate loan that locks in your interest rate.
Why is all of this important?
One way BECU earns income is from interest we receive on loans versus what is paid out to members who have deposits in interest-bearing accounts. The ratio of money we receive to money we pay out is called the spread – which directly impacts our income.
Because we don't charge many fees, we have to be diligent about our rates to ensure income is at a sustainable level to pay for the operations of the credit union.
How are BECU deposit account rates set?
We have a team who actively monitors and sets our deposit and loan rates. They consider many factors, including maintaining a sustainable balance of costs, return to our members and competitive offerings. When the Fed changes rates, our team must consider how the rate changes may influence these three factors.
Why is my credit card rate changing?
BECU is increasing the rate margin for all credit card accounts in November 2020. We are making this change in response to current market conditions. This was a difficult decision but taking this action helps ensure we are able to continue to protect and support our members in this uncertain economic environment.
When will this rate increase become effective?
Existing accounts will receive a rate increase on the November 2020 statements.
How will this rate increase affect me?
After the margin increase takes effect in November 2020, all purchases, cash advances and balance transfers will be at the new rate. This includes all recurring payments that you may have set up on your account, such as a gym membership or an annual fee.
Will my payment change?
The way your payment is calculated is not changing. The minimum payment amount is 2.5% of the account balance. For information on how to calculate finance charges, please refer to the following:
- Section 7: How to Determine Finance Charges in the BECU Credit and Security Agreement Booklet for consumer credit cards.
- Section 14a: BECU Business Credit Card Agreement in the Business Credit Card Application and Agreement Packet for business credit cards.
Why should I keep my BECU credit card?
We still offer competitive rates and we don't charge common fees that many other banks do, like an annual fee, balance-transfer, cash-advance or foreign-transaction fees. We also periodically review accounts and we may lower your rate (if you're not already receiving our lowest rate) when you've taken steps toward financial health and improving your credit score.
What if I don't want the new rate?
You have a couple options. You can contact BECU and close your account prior to the November statement date, or you can choose not to use your card for any transactions after the rate changes.