Credit card interest rates stay flat, says survey
By Kelly Dilworth | Published: July 11, 2012
Interest rates on new credit card offers remained stable 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%
|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 11, 2012|
The national average annual percentage rate (APR) on new card offers stayed fixed at 14.91 percent Wednesday.
However, not all issuers left their card offers alone this week. For example, the retail store L.L. Bean sweetened the balance transfer offer on its L.L. Bean Visa card. The store credit card previously featured a 0 percent balance transfer offer for six months. Now, applicants can transfer their balance from another card to the L.L. Bean Visa card and pay zero interest on the balance for 12 months.
The longer balance transfer period on the L.L. Bean Card is good news for consumers who want to finance their purchases at 0 percent interest for a longer period. Among the store credit cards that CreditCards.com tracks, the L.L. Bean Visa card is one of the only retail cards that offers some sort of 0 percent financing.
The retail store Cabela's also modified the maximum APR available on the Cabela's Club Visa card. The card previously featured an APR range of 9.99 percent to 18.23 percent. Now, the card offers a maximum APR of 18.24 percent.
Cabela's spokesman Joe Arterburn confirmed that the rate change on the Cabela's Club Visa was due to a change in the London Interbank Offered Rate (Libor) rate. The Libor rate is the British equivalent to the U.S. federal funds rate. When the Libor rate moves, variable rate credit cards, such as the Cabela's club Visa card, that are tied to the Libor rate move with it.
The rate change on the Cabela's Club Visa card didn't affect the national average, however, because CreditCards.com only considers the lowest rate possible rate when calculating average interest rates.
Cabela's doesn't offer any promotional deals on its Cabela's Club Visa. However, with a rate starting at 9.99 percent, it features one of the lowest APRs on the market.
Store cards often come with notoriously high APRs
Cabela's low interest rate for consumers with excellent credit is unusual for store cards. Retail store credit cards are among the costliest credit cards available to consumers, regardless of their credit score, according to CreditCards.com data. For example, among the retail cards that CreditCards.com tracks, the average APR for consumers with the best credit is 17.37 percent. The average APR for consumers with the worst credit, meanwhile, is 22.40 percent.
To get a sense of just how high those average rates on store credit cards are, consider this: A consumer who borrows $5,000 on a store credit card and pays $100 monthly at 17.37 percent interest will have to pay a whopping $3,952 in interest charges to clear the balance. That's $1,407 more than the consumer would have to pay if the consumer qualified for the best rate on the Cabela's club card. (Calculator: How long will it take to pay off your credit card balance?)
Meanwhile, if a consumer has a less-than-perfect credit score and only qualifies for the highest APRs on store credit cards, the consumer could wind up paying more in interest than was borrowed in the first place (providing the consumer doesn't pay off the entire balance every month). For example, a consumer who borrows $5,000 on a store credit card and pays $100 monthly at 22.40 percent interest will have to pay $9,643 in interest charges to reach a zero balance on the card. That's nearly twice the amount that was originally borrowed.See related: Fed Report: Consumer credit card balances shoot up in May