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Credit card interest rates stay constant

By Kate Tomasino

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.83%
14.83%
14.78%
Low interest 10.73%
10.73% 11.93%
Balance transfer 12.76%
12.76%
12.80%
Business 12.91%
12.91%
13.05%
Student
13.77%
13.77%
14.49%
Cash back  13.91%
13.91%
12.64%
Airline 14.24%
14.24%
14.45%
Reward  14.40%
14.40%
14.46%
Instant approval 15.99%
15.99%
16.49%
Bad credit 24.96%
24.96%
24.64%
Methodology: The national average credit card APR is created from a weekly survey of the offers 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: 5-6-2011

Interest rates on credit card offers stayed static this week, according to the CreditCards.com Weekly Credit Card Rate Report, though banks aren't standing idly.

The average annual percentage rate (APR) on new credit card offers remained at 14.83 percent this week, despite card offer changes from Discover and sporting goods retailer Cabela's.

Cabela's and Discover each changed the top end of a card's APR range. However, since we only use the low ends of APR ranges in our calculations, the national average APR was unaffected by these moves.

The top end of the Cabela's card's range dropped from 18.25 percent to 18.20 percent, while the low end held steady at 9.99 percent. Cabela's chief financial officer Kevin Werts said the change was a result of movement in Libor, the British equivalent of the U.S. federal funds rate. While most U.S. variable rate credit cards are tied to the U.S. prime rate -- which moves based on changes to the Federal Reserve's federal funds rate -- Cabela's card is tied to Libor. When Libor moves up or down, the APRs of all credit cards that are tied to it move in the same direction by the same amount.

The high end of the Miles by Discover card's range also dropped, falling from 16.99 percent to 15.99 percent. The low end stayed at 10.99 percent. When asked for comment on the move, Discover spokesman Matthew Towson said Discover doesn't comment on pricing strategies for competitive reasons.

As the summer travel season nears, more people may be seeking out airline rewards cards such as the Miles card. That card's latest APR decrease, combined with generally stable credit card APRs overall, is good news for cardholders going into the summer travel season on a budget. Still, before you apply for an airline or rewards card to use when you fly, make sure you do enough research and comparison to get the best deals.

A closer look at airline rewards
Airline rewards credit cards can typically be divided into two categories: airline-specific cards that feature both the airline's name and a logo for Visa, MasterCard, Discover or American Express; and generic airline miles cards that offer miles but aren't tied to any specific airline.

We surveyed all the cards that were categorized as airline cards in our database, including cards for Delta, United, American and others, as well as generic-miles cards from Discover and American Express. According to CreditCards.com data, the average APR for new airline rewards credit cards is 14.24 percent. As we do with our overall national average, we used the low ends of the APR ranges from each card to calculate the national average APR for the airline rewards cards.

Overall, the lowest APR we saw was 10.99 percent, for both Discover's Miles and Escape cards. (The top end of the APR range was 15.99 percent for both cards.) The highest rate we saw was 24.99 percent, the top end of the APR range for the U.S. Airways Premier World MasterCard. However, the low end of that range was 15.24 percent, in line with most other airline card APRs.

But there's more to a good rewards card offer than an APR. Some airline and rewards card offers come with an annual fee and others do not. All of the airline-specific cards featured annual fees -- as high as $150 -- though some dropped the fees for the first year after the account is open. Only one of the generic-miles cards we reviewed -- the Discover Escape card -- charged an annual fee. It was $60. 

A variety of rewards
The rewards offered with these cards can vary greatly. Most airline cards offer rewards on all purchases but bump up the rewards for purchases made through the airline, such as flight tickets. For example, many offer two miles per dollar spent on purchases with the airline and one mile for every dollar spent elsewhere. The Continental Airlines OnePass Plus MasterCard from Chase and the U.S. Airways Premier World MasterCard from Barclays are among those that offer those deals. Others offer just one mile for every eligible dollar spent. 

Most airline cards offer extra perks, too, beyond just points. For example, the Platinum Delta SkyMiles card from American Express rewards cardholders with a free checked bag on every Delta flight, and Chase's Southwest Airlines Rapid Rewards Plus Visa card offers 3,000 points every year on the anniversary of the date the account was opened. 

Other bonuses include miles earned on balance transfers, airline lounge access and miles accrued for signing someone up to be an authorized user on your account. For example, the Gold Delta SkyMiles card offers cardholders 5,000 bonus miles when they add two authorized users to the account.  

Some cards spread the bonuses out over an extended period. The Discover Escape card offers 25,000 bonus miles spread out over the first 25 months that the account is open. Cardholders receive 1,000 miles per month during that period, as long as they make at least one purchase in the month.

See related: What to expect when you're made an authorized user, How to win the credit card rewards game, 8 ways to maximize your rewards points.

Published: May 11, 2011


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