Credit card interest rates drop to 14.87 percent
|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. 25, 2015
rates on new card offers fell Wednesday for the first time in nearly two
months, according to the CreditCards.com Weekly Credit Card Rate Report.
national average annual percentage rate (APR) slid to 14.87 percent after U.S.
Bank lowered the APR on its Secured Visa card from 20.99 percent to 18.99
percent. The rate change caused the average APR for subprime cards to fall to
22.48 percent -- a more than four-year low.
issuers have left card rates alone since 2014. However, according to
spokeswoman Elizabeth Crosta, American Express recently notified "a small
percentage" of its 37 million U.S. cardholders that it's raising rates on
existing card accounts by an average of 2.5 percentage points.
looked at all of our rates and found that some card members had rates that are
significantly lower than market rates," says Crosta. For example, some
cardholders were being charged interest rates as low as 3.25 percent. The
average APR for low interest cards, by contrast, is currently 11.53 percent.
reviewing cardholder accounts for several months, American Express began
sending out notices in early February to cardholders who were paying below
"We made this change to better
align APRs with average APRs offered for similar cards in the marketplace,"
said Crosta in an email. The changes are also intended to make the rates
charged to existing American Express customers more comparable with the rates
offered to new customers, she says.
example, the lowest available rate on a new American Express card is currently
12.99 percent. "If you were to apply today, that would be the lowest rate
you would get," says Crosta.
So, existing cardholders charged an APR below
12.99 percent may receive a notice informing them their APR is being
increased by a few percentage points so that it's closer to the minimum APR
offered to new cardholders. For example, a cardholder paying an APR of 8.99
percent might be reassigned an APR of around 11.49 percent instead.
these card members, the new APR is no higher than if they applied for a
comparable American Express card today," added Crosta in an email.
APRs aren't the only credit card terms being changed, according to notices
reviewed by CreditCards.com. Some American Express cardholders are also receiving
notices about changes to penalty APRs, which are applied when a customer misses
example, one cardholder in Columbus, Ohio, was notified earlier this month
that the penalty APR on his American Express Blue card was being increased from
27.24 percent to 29.24 percent. His standard purchase APR of 15.24 percent was left
unchanged. In the disclosure, dated Feb. 11, American Express told the customer his current penalty APR was "lower than typical penalty APRs for similar
cards in the marketplace" and so it was being increased to make it more
to Crosta, "it has been some time" since American Express raised interest
rates for a significant number of existing cardholders, but the card issuer has
been thinking about changing cardholders' rates since 2014. "Over time,
there are changes in the industry, changes to credit profiles and over time, we
look at those factors," she says. This is a common practice for card
issuers, she adds. "We do look at rates all the time."
What to do if you receive a rate
receive notification of a rate increase on an existing credit card, don't
panic. You have some time to sort out your finances and decide whether it's
worth keeping the card.
the Credit CARD Act of 2009, card issuers must give you at least 45 days' advance
notice of a rate increase and they must also give you the same amount of time
to decide whether to accept the hike. If you decide to opt out and close
your account, you will be charged your current rate until you repay your
balance in full.
careful about new purchases, however. The lower rate only applies to your
existing balance prior to the rate increase. If you decide to use the card
after you receive notice of a rate hike, you may have just a few weeks left before the new card APR is
applied to new purchases.
See related: 2015 Balance Transfer Survey: Offers more generous, but move fast
Published: February 25, 2015