Rate survey: Average card rate sits tight at 15.16%
By Kelly Dilworth | Published: March 9, 2016
The average credit card interest rate didn’t budge this week, according to the CreditCards.com Weekly Credit Card Rate Report.
For the fifth week in a row, the national average annual percentage rate (APR) stayed at 15.16 percent. None of the cards included in the weekly rate report advertised new interest rates. Most of the cards’ introductory offers remained unchanged as well.
American Express sweetened the 0 percent promotional offers on its EveryDay credit card. Cardholders now have 15 months to take advantage of interest-free purchases and balance transfers. Previously, cardholders had just 12 months to enjoy a 0 percent rate.
Average rates on new card offers are currently near record highs. Since January 1, the national average APR has hovered just above 15.10 percent. It’s the longest period of time rates have remained that high since CreditCards.com began tracking rates in 2007.
Credit card usage on the rise
Interest rates on new and current credit card accounts are expected to rise even higher in 2016 as the Federal Reserve gradually increases the federal funds rate – a key benchmark interest rate that affects APRs on a wide range of variable rate loans. But despite the impending rate hikes, consumer appetite for credit continues to increase.
According to research from the American Bankers Association, the consumer credit card market grew steadily last year as people opened more credit accounts and made more purchases with credit.
In the third quarter of 2015, lenders mailed nearly 79 million new credit cards to consumer households – nearly 17 percent more than the year before. As a result, the total number of open credit card accounts grew by 5 percent in the third quarter, expanding to roughly 320 million accounts by the beginning of October.
Consumers with lower credit scores enjoyed the biggest gains, according to the American Bankers Association’s Credit Card Market Monitor. For example, the number of new card accounts belonging to consumers with subprime credit scores grew by 30 percent, year-over-year, while new accounts belonging to consumers with good-but-not-great credit scores jumped by 26 percent. Meanwhile, consumers with the highest credit scores opened 22 percent more card accounts compared to the year before.
Average credit lines also increased in the third quarter. Average credit lines on new prime accounts grew by 2.5 percent, while average credit lines on super prime accounts expanded by nearly 2 percent. Credit lines on new subprime accounts also grew, but at a slower rate. Despite offering more cards to consumers with lower credit scores, card issuers are still keeping credit limits for their riskiest customers relatively low, said the American Bankers Association.
Consumers, meanwhile, are taking advantage of their larger credit limits by spending more heavily on their cards.
Cardholders made a record number of purchases in the third quarter, causing purchase volumes to notably increase, according to the banking trade group. According to the American Bankers Association, cardholders made a record number of purchases in the third quarter of 2015, causing purchase volumes to notably increase. Consumers with the highest credit scores, for example, spent nearly 4 percent more in the third quarter than they did the previous year. Meanwhile, consumers with the lowest credit scores spent more than 6 percent more in the third quarter.
“Recent growth in the credit card market is consistent with what we’re seeing in the broader economy,” said the ABA’s Jess Sharp in a March 8 news release. “With nearly 6 million jobs created over the last two years, it’s natural to see strong growth in new cards and purchase volumes. Faster wage growth and healthy levels of disposable income have helped shore up many account holders who may have had difficulty managing their credit in the past.”
|CreditCards.com's Weekly Rate Report|
|Avg. APR||Last week||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: Sept. 16, 2015|
See related: Fed: Card balances fall first time in 10 months