Beginning with the December statement, Nordstrom Bank will be lifting its rate floor to 5% from its current rate of 4%, CreditMattersBlog.com has learned. What's more, customers, across the board, will see an interest rate hike beginning in January, according to my source. Worse, customers will not be able to opt out of the interest rate hike.
Nordstrom bank plans to raise rates on tier I customers to 7.9% (the new rate floor of 5% + 2.9%). Tier II customers will see their rates go to 10.9% (5% + 5.9%), tier III customers will see their rates climb to 14.9% (5% + 8.9%), tier IV customers will see a new rate of 18.9% (5% + 13.9%), and tier V customers will see their rates jump to 22.9% (5% + 17.9%). The change affects Visa cards as well as Nordstrom's store card.
The two-step process (first an increase in the rate floor and then an interest rate hike across the board) reflects economic conditions in the marketplace, according to my source. Nordstrom Bank is a standalone bank, which does its own underwriting. It's not immune to the economic winds of change. That it has managed to keep rates this low, for as long as it has, is surprising. To learn more about interest rate floors, see the story I did last month (link here).
(Editor's Note: I received my notification letter on Monday. In it, Nordstrom, in addition to confirming what I wrote about the rate change, also added a disclosure about crediting payments. Read the story here (link).)
Customers will begin receiving notification letters about the rate changes in the mail within the next 10 days or so. Currently, Nordstrom credit card customers are eligible for prime rate + 0% (tier I pricing) to prime + 14.9% (tier V pricing). Because prime is now 4%, the new interest rate change at Nordstrom essentially doubles the rate of tier I customers . The new rate goes from 4% to 7.9%. Even with the rate changes, Nordstrom will remain competitive. Its rates will now be more inline with interest rates that its competitors offer.
For those of you wondering, the rate changes will impact current balances. If you're carrying a balance at prime + 0%, for example, your balances will be assessed interest at 7.9% when the rate changes are made effective. That goes for all customers along the entire interest rate spectrum.
Additionally, this rate change will go into effect even if you decide to close your account -- in an attempt to reject the interest-rate increase. Whether your account is left open or you decide to close it, the rate change will go into effect. 
Note that if prime goes over 5%, prime will be in play with the new pricing structure. It will be prime plus the new margin rates of 2.9%, 5.9%, 8.9%, 13.9%, and 17.9%, respectively.
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Friday, November 7, 2008
Sign Of The Times: Nordstrom Bank To Lift Interest Rates On Its Credit and Store Cards
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24 comments:
Thanks for the update. I should have guessed that this was coming - Just last week I was commenting to my girlfriend that the rate on my Nordstroms card was lower than my mortgage. I probably jinxed it right there.
Yeah. It was a depressing phone call for me this evening when I was talking with my Nordstrom source. According to this person, Nordstrom will reevaluate the situation after the rate changes go into effect. Personally, I don't believe that rates are coming back down. Nordstrom has always left money on the table with its pricing structure.
Sucks. It is a tough environment for luxury retailers right now. Saks' had a decline of 28% in it's monthly sales number.
Another thing that Nordstrom doesn't do: no balance transfers. Just another place where it could earn some fees. I didn't get any indication that balance transfers would be an option anytime soon.
I think the G.19 report comes out tomorrow (Fed report on consumer credit). We'll see what that shows.
Yes, I noticed that as well. Since I do all my BT's at 0%, the low rate is not helpful at all.
Apparantly, they must've figured out that if the Prime rate keeps falling any lower, it'll seriously make their bottom capped rates look bad :-P
Whatever the reason, it sucks. I loved having a card at 4% (would have been 4% on Nov. 15). Now we're all going to our base rate (5%) + margin (2.9% for me). I don't like 7.9%. Plus, this card is no longer my lowest-rate card.
Apparently, Nordstrom customers started receiving their rate-hike letters today in the mail. Not surprisingly, I have seen a pick up in Google traffic. About an hour ago I noticed a pickup in Nordstrom searches. I knew something was up. Customers getting their letters today would explain the traffic.
For newbies to my blog, welcome.
A little more color for my readers. Nordstrom did not include the rate-floor adjustment news in the three-part letter we received notifying of us the rate hikes. Apparently, the rate floor information will be included in your next statement.
Additionally, even though the rate hike allegedly goes into effect beginning during the first statement after November 15, 2008, I am told that the rate hike will be phased in slowly -- and that it won't be fully implemented until January.
That's what I am hearing.
well this sucks the apr was a killer low rate but even the new apr of 7.9 is still pretty darn good.
Anon, I agree. I loved having that low rate. Even though I pay in full, it was nice to know that I had a card that was at prime. If I was ever going to carry a balance, this is the card I would have done it on.
As it stands, this is no longer my lowest-APR card. That award goes to Citibank. Still, as you said, 7.9% is still pretty darn good.
Nordstrom is now competitive with the rest of the industry.
if you don't mind me asking what is your citibank apr? also is it a fixed rate or variable rate? thanks my curiousity got to me.
My rate is currently 6.65%. It's variable. I have the Citibank Diamond Preferred card.
wow not bad. btw do you know if the nordys 7.9% is going to be a fixed apr or still variable? i am wondering since they went with a min. prime rate of 5% plus the 2.9?
Anon, the Nordstrom card will still be variable.
For now, the rate is 7.9%. It will go no lower than that. However, if the prime rate goes above 5% (it's currently 4%), then your Nordstrom rate will go even higher than 7.9%.
As I said in my story, Nordstrom's new rate floor is 5%. Even if prime goes lower than 5% (like now), your rate will not follow.
Thus, from here our rates can only go higher. If prime goes to 6% (in the future), then our rate would be 8.9% (6% + 2.9%).
Hope that helps, Anon.
Gotcha! thanks for the feedback. it will be interesting to see what happens next year with everything. economy? prime rate? etc...FYI the last 3 anom. posts were me Creditcrazy from the cardratings board.
Creditcrazy, thanks for revealing yourself! LOL. Nice to know who I'm conversing with.
You're welcome for the feedback.
okay so i got my november statement today and it mentioned nothing of the rate hike. maybe the notice of rate hike will come in a seperate letter? it still shows 4.5% apr.
The letter comes separately. In fact, it's a three-fold thing that looks like a postcard. You should contact Nordstrom and ask them to send you a change in terms letter -- the one that the rest of us have already received.
well it's been a few months since the last post. i am curious is everyones new statements now showing the 7.9%. i have a friend and she swears that her's is still showing 4%. whats the scoop with everyone?
I am at 7.9%.
BAD NEWS. i got a letter yesterday informing me August 1st new rates. they now have seperate apr's for nordstrom shopping and non nordstrom purchases. so i am now at 10.9 for non nordy shopping and still 7.9 for nordy only shopping. this sucks!!! check out their website. it gives the breakdowns on apr and the different tiers.
I actually mentioned this a couple of days ago on my Twitter account, Travis. But thanks for checking in nonetheless.
http://twitter.com/CreditMatters/status/2105472239
WARNING! Think twice about Nordstrom!
Nordstrom Bank recently increased their annual percentage rate 3%; and that's only for in-store purchases. If you use your card for Non-Nordstrom purchases they will charge you 14.9%. The Visa card I opened with them was supposed to be like a regular Visa but it's not -- they are holding you hostage to only use it at Nordstrom stores.
But Wait; There's more! Not only did they drastically increase their interest rates they also informed me that I could not opt out of the changes; their excuse was that they were a bank in Arizona and in Arizona you can't decline the change in terms.
WARNING! DO NOT GET A NORDSTROM VISA!
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