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Rate survey: Average APR drops following First Premier move

By Kate Tomasino

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.95% 15.14%
14.75%
Low interest 10.40%
10.62% 10.73%
Balance transfer 12.71%
12.85%
12.78%
Business 13.13%
13.13%
13.07%
Student
13.77%
13.77%
13.77%
Airline  14.54%
14.54%
14.31%
Cash back  14.61%
14.74%
14.16%
Reward 14.78%
14.82%
14.51%
Instant approval 15.49%
15.49%
15.99%
Bad credit 23.41%
24.96%
24.96%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: Jan. 11, 2012

Interest rates on new credit card offers fell this week, according to the CreditCards.com Weekly Credit Card Rate Report, due to a sharp APR drop for the priciest card in our survey.

The average annual percentage rate (APR) dipped to 14.95 percent, its lowest level since early September. That's down more than a quarter-point from the record high of 15.22 percent set in mid-December.

First Premier -- a bank that issues cards targeting consumers who have thin or below-average credit -- sent the national average tumbling by tweaking the APR offered for its Gold MasterCard from 49.9 percent to 36 percent. Even with the decline, it's still the highest APR of any credit card CreditCards.com tracks. However, both rates are far from the highest ever seen from First Premier. The company made headlines in 2009 when it offered a credit card with a 79.9 percent APR.

First Premier confirmed the change, but didn't elaborate on why it was made.

First Premier's eventful year
The move comes on the heels of a tumultuous year for First Premier. The company laid off hundreds of workers in the summer of 2011. Then, in July 2011, the issuer sued the Federal Reserve and the new Consumer Financial Protection Bureau over a rule that limited upfront fees associated with credit cards. The Credit CARD Act of 2009 prohibits upfront fees from totaling more than 25 percent of the card's total available credit in the first year. The Federal Reserve subsequently added a rule that stated that fees charged before an applicant was approved for the card -- an application fee, for example -- should be subject to that 25 percent cap. First Premier, which had charged application fees, objected to that rule, saying that it went beyond what the CARD Act had intended.

In September 2011, a U.S. District Court in South Dakota, where First Premier is based, granted a temporary injunction preventing enforcement of the rule until a final decision comes from the courts. It is unclear when that will happen, but the Argus Leader newspaper in Sioux Falls, S.D., quotes Miles Beacom -- CEO of Premier Bankcard, which markets First Premier cards -- as saying that it could take a couple of years for the legal process to play out. 

In the meantime, the Argus Leader says, "Beacom's goal is for Premier to grow from 1,500 employees to 1,700 by the end of [2012]. He plans to hire 50 workers by early January" of 2012. 

First Premier declined to comment on the case. "Since the lawsuit filed by First Premier Bank and Premier Bankcard against the Federal Reserve Board and the United States Consumer Financial Protection Bureau is still in progress, we are not at liberty to make any comments at this time," said First Premier spokeswoman Meranda Sylliaasen.

Chase, Cabela's also make moves
Chase also contributed to this week's decrease. Its Freedom card changed from a flat interest rate of 14.99 percent to a range of 11.99 percent to 22.99 percent. Meanwhile, its Slate card moved from a flat 13.99 percent to a range of 11.99 percent to 21.99 percent.

Steve O'Halloran, Chase's Public Affairs Director, confirmed the moves. 

"Chase offers a number of cards with different rates and benefits, which is why we encourage customers to choose the card that is best for them," O'Halloran said.  

It is the third time Chase revised the APRs it offers for the Slate and Freedom card in the past month.

Another rate change we observed this week came from sporting goods retailer Cabela's. The top end of the APR range for the Cabela's Club Visa card rose from 18.26 percent to 18.29 percent, while the low end remained at 9.99 percent. Since only the low ends of APR ranges are used to calculate the national average, Cabela's move didn't affect it.

Cabela's Chief Financial Officer Kevin Werts said the move was due to a change to the London Interbank Offered Rate, or Libor -- the British equivalent of the U.S. federal funds rate. When Libor moves, the Cabela's card's APR -- and the APRs of all other variable rate credit cards tied to Libor -- move by the same amount in the same direction. While most U.S. variable rate credit cards are tied to the prime rate in the U.S., which moves based on changes to the Federal Reserve's federal funds rate, the Cabela's card is tied to Libor.  

Creditors' moves this week caused a few prominent changes to the credit card categories we survey. Out of the nine categories CreditCards.com tracks, five fell. The low interest, cash back, balance transfer, rewards and bad credit categories were affected -- with low interest, balance transfer and bad credit yielding the most noteworthy changes. 

  • Interest rates on low-interest credit cards are the lowest they've been -- at 10.40 percent -- since June 2009.
  • New offers on balance transfer credit cards are at their lowest point -- 12.71 percent -- since September 2010.
  • The bad credit category, which includes First Premier's Gold card, is the lowest CreditCards.com has seen since October 2010 -- coming in at 23.41 percent.

Though it may seem like a sensible time for those with bad or no credit to take advantage of those lower rates, it's always important to do your research.  Many "bad credit" credit cards have high fees and hefty terms and conditions associated with them that can negate any APR savings.

See related: A guide to the Credit CARD Act of 2009

Published: January 11, 2012


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