Rate survey: Rates hold steady at 14.96 percent
Card offers remain stable as competition appears to soften
Interest rates on new credit card offers remained at
14.96 percent Wednesday, according to the CreditCards.com Weekly Credit Card
|CreditCards.com's Weekly Rate Report
||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: Feb. 13, 2013
None of the cards CreditCards.com tracks featured
rate or offer changes this week. However, that's nothing new.
So far, most issuers have been content to leave
credit card terms alone in the opening weeks of 2013. Among those issuers that
have tweaked offers, the changes have been minor.
Last week, Chase was the first issuer to break an
11-week stretch in which APRs on existing cards remained the same by raising
the rate on the Amazon Rewards card by 1 percentage point.
American Express also made a rare offer change last
week by eliminating the promotional balance transfer offer on its JetBlue
credit card. It was the first time in six weeks that CreditCards.com recorded
an issuer changing a card's promotional rate.
card issuers appear to be taking a hands-off approach to credit card offers for
the time being. For example, rather than compete for new customers by
frequently altering the amount of time a promotional offer,
such as an introductory balance transfer rate, lasts, many issuers are choosing one
promotional offer that works and sticking to it.
Few issuers made major changes to promotional offers
in 2012, according to CreditCards.com data. That's in stark contrast to
previous years when issuers frequently attempted to lure new customers by
introducing longer-term promotions for a temporary period, then rolling those
"We're not seeing the 18- or 21-month [promotional]
interest rate we have in the past," says Andrew Davidson, a senior vice
president at Mintel Comperemedia, which tracks direct mail offers.
Issuers are instead competing more directly with
rewards, he says. "There's still a lot of competition and innovation in
rewards," says Davidson.
As for other, more traditional ways to compete, issuers
appear to be more passive.
For example, issuers aren't widely cutting
interest rates these days, notes Davidson. In fact, standard interest rates were
so stable in 2012 that the national average APR remained the same a record 36
weeks out of 52, according to CreditCards.com research, and hovered within
rounding distance of 15 percent all year.
Davidson says that the stability in rates -- and relatively
high average -- is largely due to rules imposed by the Credit CARD Act of 2009,
which limit issuers' ability to change a current cardholder's APR without 45
days' advance notice. That lack of flexibility makes issuers less willing to
offer a lower APR upfront, say experts.
In addition, issuers cut back substantially on the
number of credit card mailings they sent in 2012, according to Mintel Comperemedia
research, after ramping up the number of offers they sent in 2011.
Experts say that the volume of credit card offers
that issuers send out is often a good indication of how hungry issuers are for
new customers. However, in this case, issuers appear to not only be taking a
more cautious, less aggressive approach to how they market cards to consumers; many
issuers are also actively testing fresh ways to reach potential customers, says
Davidson. That, in turn, is causing the volume of direct mail offers sent to
potential cardholders to go down.
"Basically, volumes have been flat in 2012," says
Davidson. "We saw this aggressive period of expansion following the recession.
Since then, issuers have cooled off and it seems to have bottomed out."
Now, "we seem to be reaching a period of stability,"
Issuers are also remaining cautious about the United States'
fragile economic recovery and that is playing a significant role in their
decision-making, says Davidson.
"As the economy strengthens, I think we will see
some recovery in volumes," says Davidson. However, it's unlikely to return to
the way it was prior to the recession when issuers flooded consumers' mailboxes
with offers, says Davidson -- particularly now that issuers are discovering new ways
to market their cards. "It's just a different world now," he says.
See related: Banks remain reluctant to ease terms on new cards
Published: February 13, 2013