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Credit card interest rates continue to remain unchanged

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Average credit card interest rates held steady this week, according to the CreditCards.com Weekly Credit Card Rate Report.

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.91%
14.91%
15.00%
Low interest 10.40%
10.40% 10.73%
Balance transfer 12.43%
12.43%
12.77%
Business 12.67%
12.67%
13.13%
Student
13.77%
13.77%
13.77%
Cash back  14.24%
14.24%
14.70%
Airline  14.63%
14.63%
14.44%
Reward 14.70%
14.70%
14.71%
Instant approval 15.49%
15.49%
15.99%
Bad credit 23.64%
23.64%
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: April 18, 2012

The national average annual percentage rate (APR) on new credit card offers remained fixed at 14.91 percent Wednesday. This is the eighth time this year rates have remained unchanged.

Looking back at the first four months of 2012, rate changes on new credit card offers have been relatively favorable to new cardholders. Except for a surge in March, when several rewards cards raised rates, the average APR has either declined or stayed put.  

The fitful decreases in the first quarter of the year have made a significant difference to new cardholders' bottom-lines. For example, a cardholder who borrows $5,000 on a credit card today at 14.91 percent interest and consistently pays $100 monthly will have to pay $2,863 in interest to clear that balance. That's $86 less than they would have paid at the beginning of the year when average rates were at 15.14 percent. (Calculator: How long will it take to pay off your credit card balance?)  

However, despite the brief respite from surging APRs, consumers seeking new cards are still contending with relatively high rates. A year ago, average rates were at 14.67 percent. By Dec. 14, they climbed to 15.22 percent, which is the highest average recorded since Credit Cards.com began tracking rates in mid-2007. Although rates have flattened somewhat since then, they are still hovering near record highs.

The good news is that it appears more cardholders are paying their bills on time, which could eventually have a ripple effect on cardholders' access to cards with favorable terms.

Delinquencies (which, in industry-speak, mean late payments of 30 days or more on credit cards) declined for all six of the country's largest credit card issuers in March, according to company reports.

Meanwhile, the number of charge-offs, which occur when a bank gives up on collecting a debt, declined to a four-year low for prime credit cards, according to Fitch's Prime Credit Card Chargeoff Index. (Capital One and Chase reported slightly higher charge-off rates in March, according to Dow Jones Newswires. American Express, Bank of America and Citi reported declines.)

The significant drop in late and uncollectible payments is a good sign for card issuers and may spur them to lend more freely, say experts.

"There are two different things that could positively affect a lender's willingness to make a new credit card loan," explains Moshe Orenbuch, managing director at the international financial services firm Credit Suisse. "One would be better performance of their existing portfolio and that's what better delinquencies shows, and the other would be a general improvement in the economy. Either of those would make them more willing to lend money."

Stable jobs numbers and lower bankruptcy filings may also mean a healthier credit outlook for the next several quarters, predicted Credit Suisse in a research note released on Monday. However, the research firm expects the number of cardholders who miss their payments will increase by the middle of the year.  

Meanwhile, issuers are likely to continue pushing for new credit card customers in the months ahead, especially as they become more confident about their own credit health.

"In general, they're trying to get more revolving balances," says Orenbuch. "They've been successful in getting people who are going to charge more money." However, they haven't been as successful in luring people who are going to carry a balance from month to month, he says. Interest earned on revolving balances is a key source of income for issuers and so attracting cardholders who are less likely to pay their bills in full each month is an important goal for them.  

See related: Bankruptcies continue to slide

Published: April 18, 2012


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