Rate survey: Credit card interest rates fall
Interest rates on new credit card offers dipped this week, according to the CreditCards.com Weekly Credit Card Rate Report. The national average (APR) on new card offers fell 0.01 percent to 14.91 percent Thursday.
|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: July 5, 201|
The rate change was spurred by a new higher rate on the Texaco Visa card and by the replacement in the CreditCards.com database of the Bank of America Student Platinum Plus card with the BankAmericard for Students.
The APR on the Texaco Visa rose from 23.99 percent to 26.99 percent this week. However, the card's impact on the national average was blunted by a change to Bank of America's student credit card offers.
The bank discontinued its Student Platinum Plus card, confirmed Bank of America spokeswoman Betty Riess. The card wasn't as popular with students as other Bank of America cards, she said. "Even when we had the student-branded card, the majority of students who applied and qualified for a credit card selected a card other than the Student Platinum Plus card," wrote Riess in an email.
The Student Platinum Plus card featured a flat APR of 14.24 percent and no promotional offers. Students searching for a basic credit card on the Bank of America website can still select a BankAmericard for Students, which has a significantly lower minimum APR and offers a 0 percent APR on purchases and balance transfers for 15 months.
CreditCards.com replaced the Student Platinum Plus card in the database with the BankAmericard for Students, which features an APR range of 10.99 percent to 19.99 percent. Because CreditCards.com only factors in the lowest possible APR when calculating rates, only the card's low-end APR affected the national average, helping push the average down to 14.91 percent.
Due to the change, the average APR for student cards is the lowest it has been for more than a year. Today, the average student cardholder pays just 13.31 percent in interest when they carry a balance each month. That's lower than the national average. However, it's still significant.
For example, a student who borrows $1,000 on a credit card to pay for books or entertainment, and pays $50 monthly at 13.31 percent interest, will pay $137 in interest to clear the balance. But many students pay just the minimum payment. That same student, paying a 3 percent minimum monthly payment would pay far more -- $311 -- to get to a zero balance on the card. (See Calculator: How long will it take to pay off your credit card if you just pay the minimum?)
That said, students aren't locked in to choosing a student card -- if they have the credit history to qualify for another one. "Students who qualify for credit can apply for the card that best meets their needs," says Bank of America's Riess.
Many credit card issuers, including Bank of America, also offer rewards student credit cards. However, as with other rewards credit cards, the APRs tend to be higher.