Rate survey: Credit card APRs unchanged this week
By Kate Tomasino | Published: June 1, 2011
|CreditCards.com's Weekly Rate Report|
|Avg. APR||Last week||6 months ago|
|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.)|
|Updated: June 1, 2011|
The average annual percentage rate (APR) on new credit card offers was unchanged this week, staying fixed at 14.83 percent.
This doesn't mean issuers aren't still testing and tweaking offers, though. Discover lowered the top end of its APR range on their Miles by Discover card this week. However, as cardholders get ready for their summer vacations, the truth is that credit card interest rates are substantially higher than they were last summer -- thanks at least in part to hikes in bad-credit credit card APRs.
The change to the Miles card -- which is not a bad-credit credit card -- was the only APR change we noted this week. The top end of the APR range on the card was 10.99 percent to 15.99 percent, down from 10.99 percent to 16.99 percent. The change had no impact on the national APR average, since only the low ends of ranges are used in the calculation.
When asked to comment, Discover declined.
The overall national average was 14.23 percent during the first week of June 2010 and is 14.83 percent now; the rewards cards average has risen just from 14.34 percent to 14.40 percent.
Bad-credit credit cards have been a major factor in the national average's increase. The category's average has shot from about 19.75 percent in June 2010 to 24.96 in June 2011. In October 2010, First Premier -- a bank that issues cards that are marketed to subprime consumers, who have thin or poor credit and might not qualify for better terms -- began charging a flat 59.9 percent APR for all new Centennial Classic credit cards. That card previously offered both a 23.9 percent and 59.9 percent rate to its new cardholders. Dropping the 23.9 percent APR in favor of a fixed rate of 59.9 percent sent the national APR soaring.
First Premier and other subprime issuers have been hit hard by the Credit CARD Act, which outlawed many fees and practices associated with bad-credit credit cards. For example, under the CARD Act, fees charged during the first year an account is open cannot total more than 25 percent of the card's credit limit.
Since the law was enacted, First Premier has experimented with several rate changes, attempting to make up the loss of profits caused by the CARD Act's restrictions. They've apparently met with little success. Premier Bankcard -- the company that markets the First Premier cards -- recently laid off hundreds of employees. In a press release, Premier CEO Miles Beacom said the moves were "the direct result of our inability to price based on risk under the new regulations."
Meanwhile, other recent credit-related developments offer good news for consumers. Credit card charge-offs -- or credit card account balances written off by banks as uncollectible -- have decreased and are expected to keep decreasing, according to the latest survey by financial ratings agency Moody's.
Charge-off rates declined in April to 7.16 percent from 7.56 percent in February. As the cost of goods and services decline and employment slowly increases, Moody's said in its survey, cardholders may be in a better position to repay their outstanding credit card balances.
See related: An interactive guide to the Credit CARD Act
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