Rate survey: Interest rates dip for first time in 10 weeks

By Kelly Dilworth

Interest rates on new credit card offers dipped Wednesday after remaining unchanged for 10 straight weeks, according to the CreditCards.com Weekly Credit Card Rate Report.

The national average annual percentage rate (APR) fell to 14.95 percent Wednesday. This is the first time since November that average rates have changed. Unlike previous rate changes, however, this week's change was due to a reshuffling of the CreditCards.com database, rather than to a new APR on an existing card.

CreditCards.com occasionally replaces old cards with new ones in order to more accurately reflect the current card market. This week, we swapped two Citi cards that are no longer available online, the Citi Forward card and the Citi Platinum Select Visa, with two cards that have similar features: the Citi Thank You Preferred card and the Discover "it" card. The slight difference in the cards' APRs caused the national average to decline.

Discover introduces mortgage-centric perk
Credit card offers have remained remarkably stable in recent months, with few issuers making big changes to the cards it offers new customers. However, at least one issuer has remained busy, making significant changes to its current card lineup -- and to the perks it offers customers.

On Jan. 2, 2013, Discover introduced its "it" card and removed several older cards, including the Discover More card and the Discover Open Road card, from its marketing pages online. Discover later explained to CreditCards.com that the new card, which offers generous cash-back rewards in rotating categories and doesn't charge customers a late payment fee the first time a customer slips up, is intended to be the issuer's primary flagship credit card.

Now, the issuer has shaken up its credit card offers further and introduced an unusual perk for new and current cardholders: cash-back in exchange for their mortgage business. The one-time, cash-back bonus on appraisal deposits is designed to reward customers for taking out a home loan with the issuer's mortgage business, Discover Home Loan.

Cardholders who buy a new home or refinance an existing mortgage with Discover Home Loan before April 16 will get a 5 percent cash-back bonus if they use a Discover card to pay for an appraisal deposit. 

Discover's mortgage-centric offer, introduced Jan. 16, is unique in its use of credit card rewards to drum up business for mortgage lending. 

More cardholders, more missed payments
Discover is one of the few credit card issuers to make substantial changes to its credit card portfolio in recent months. However, as the U.S. economy continues to recover from the financial downturn, many issuers are still fiercely competing for new customers, say experts, and are gradually offering more cards to consumers with less-than-perfect credit scores.

Experts predict that issuers will continue to slowly ease restrictions on new credit throughout 2013. During that period, late payments on credit cards are also expected to increase.

Currently, late payments are at record lows as consumers regain control over their finances. The total amount of outstanding credit -- meaning the amount of money that Americans still owe past a bill's due date -- for example, dropped below $100 billion in the fourth quarter of 2012 for the first time in 17 years, according to research released by Fitch Ratings on Jan. 22.

Credit card charge-offs -- payments that credit card issuers have written off as uncollectible -- also fell in the fourth quarter of 2012, according to Fitch Ratings' Credit Card Index.

That downward trend won't last long, however. "Consumers resilience at keeping their debt in check while continuing to pay it down is keeping monthly payments steady," said Fitch Managing Director Michael Dean in a statement.

However, as credit card issuers continue approving larger numbers of applicants with less-than-pristine credit, missed payments will inevitably rise, say experts. "Credit card charge-offs will plateau in the near-term before inching upward during the second half of 2013," said Fitch's Dean in a statement.   

See related: Bankruptcies fell 14 percent in 2012, continuing two-year decline,  Card balances pick up for second month

Published: January 23, 2013

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