ADVERTISEMENT

Rates steady this week, but banks keep tweaking other terms

By

Banks may have left rates unchanged this week, but they nevertheless made some changes behind the scenes that could impact cardholders' pocketbooks.

CreditCards.com's weekly rate chart
  Avg. APR Last week 6 months ago
National average 12.64% 12.64% 13.09%
Business 9.69% 9.69% 16.74%
Low interest 11.91% 11.91% 12.32%
Cash back 12.36% 12.36% 12.06%
Reward 12.85% 12.85% 13.71%
Instant approval 13.32% 13.32% 10.74%
Balance transfer 
13.46% 13.46% 10.93%
Airline 13.60% 13.60% 13.95%
Bad credit 14.29% 14.29% 12.15%
Student 14.45% 14.45% 14.89%
Methodology: The national average credit card APR is comprised of 95 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: 11-05-2009

Annual percentage rates on new credit card offers remained at 12.64 percent, according to the CreditCards.com Weekly Credit Card Rate Report. Despite the pause, APRs have been steadily rising. The latest result is up from 12.17 percent in early September. However, the real moves took place behind the scenes, as banks readied themselves for the Credit CARD Act, whose major provisions take effect in February 2010.  

This week, Discover became the first major issuer to reveal how its cards will operate under the CARD Act. As early as December 2009, Discover will begin eliminating terms banned by the new regulations.

That means existing credit card balances will not see their interest rates suddenly increase, while both over-the-limit and pay-by-phone fees will be eliminated. However, Discover will also raise minimum payments and will switch cash advances to variable rates.*

The prime rate was unchanged after the Federal Reserve -- the nation's central bank -- said Wednesday it would keep its key lending rate at a range of 0 to 0.25 percent. In its statement, the Fed said that despite signs of recovery, it continues to expect the delicate health of the economy to require "exceptionally low levels of the federal funds rate for an extended period."

Banks are increasingly offering variable rate cards so that rates can rise automatically, without running afoul of the reform law's restrictions, any time the Fed hikes rates. Variable rates are set using the prime rate, which is 3 percentage points above the federal funds rate. Currently, the prime rate at stands 3.25 percent.

For now, analysts say the Fed's announcement won't affect cardholders. "The impact on credit cards from this statement are negligible," says Joe Brusuelas, director with Moody's Economy.com. Brusuelas says that the Fed has moved away from using the federal funds rate to help the economy and toward the use of other tools, including the purchase of mortgage-backed securities. 

However, as the central bank begins to put away these tools, borrowing rates -- including those for credit cards -- will rise. That resulting increase isn't far off. "The market will begin to push rates up in the first quarter of 2010," Brusuelas says

See related: A comprehensive guide to the Credit CARD Act of 2009Discover debuts reform-law compliant credit card termsFed leaves rates unchanged again, stays positive about economy

* As originally published, this article incorrectly stated that Discover would raise penalty interest rates. See the CreditCards.com corrections policy

Published: November 5, 2009


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 10-01-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT