Average credit card interest rate increases to 14.9 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: March 25, 2015
Average rates on new credit card
offers inched up this week for the first time in nearly five months, according
to the CreditCards.com Weekly Credit Card Rate Report.
The national average annual
percentage rate (APR) rose to 14.9 percent Wednesday after TD Bank increased
the minimum APR on the TD Easy Rewards Visa from 9.99 percent to 12.99 percent.
The East Coast bank also
lowered the card's maximum APR from 23.24 percent to 22.99 percent, but that
change didn't affect the national average because CreditCards.com considers
only a card's lowest APR when calculating average rates.
Capital One also introduced
new rates this week. Cardholders who qualify for the Venture Rewards card are
now offered a wider range of APRs, starting at 12.9 percent and topping out at
22.9 percent. Applicants were previously offered a narrower range of 13.9
percent to 20.9 percent.
Card issuers cut promotional spending
Card issuers have pared back
the number of card offers they mail to potential customers, according to new
estimates from financial services firm Credit Suisse.
In February, issuers mailed
just 283 million offers -- 8 percent fewer than mailed in January and 6 percent
fewer than the year before. In January, credit card mail volume also dropped
compared to 2014.
Last month's modest cutbacks
could mean issuers aren't competing nearly as aggressively for new cardholders.
"Mail volume is an important measure of the competitive landscape,"
wrote Moshe Orenbuch, Lesley Robertshaw and James Ulan in a March 23 research
note. As a result, consumers may see fewer enticing offers in their mailboxes --
at least until issuers decide to ramp up their promotional spending.
When issuers fiercely compete
for new customers, they often flood potential cardholders' mailboxes with tempting
offers promising extended interest-free promotions and other perks. But
external factors, such as a softened economy, sometimes prompt card-issuing banks
to cut back.
During the Great Recession,
for example, credit card mail volume fell dramatically as issuers retrenched and
focused on attracting the most-creditworthy consumers. Since then, card mail
volume has picked up somewhat as issuers compete more aggressively for a broader
group of customers. But credit card mail volume is still far from pre-recession
levels. In 2006, issuers mailed approximately 8.1 billion offers. In 2014,
issuers mailed less than half that amount, sending out just 4 billion offers.
Analysts at Credit Suisse
predict consumers will see more offers as the year goes on, as it estimates total
mail volume will increase to 4.2 billion offers by the end of 2015, which would
be the largest number of offers mailed since 2011. "This is based upon
commentary from several of the large players that they will be increasing their
marketing spending in 2015," wrote Orenbuch, Robertshaw and Ulan in the
note. "However, year-over-year growth rates have been decelerating."
So card issuers may wind up mailing out fewer offers than promised.
American Express, in
particular, is expected to ramp up its promotional spending over the next year
as the company tries to make up for lost customers. Two major co-branded credit
card partners -- Costco and JetBlue Airways -- recently decided not to renew
their contracts with the card issuer. As a result, American Express has been
forced to come up with new ways to increase revenue.
In February, American Express
was offering double the rewards for restaurant purchases on its Gold line of
credit cards and boosting some of its travel perks. Around the same time, news broke
that it was also increasing rates for a some cardholders who have
been enjoying below-market APRs. In addition, American Express announced
last week a new loyalty program that allows cardholders to earn rewards points
even when using other forms of payment, such as cash and debit cards.
Meanwhile, Discover is also
expected to ramp up its promotional spending as it markets the new Discover "it"
Miles card, said Credit Suisse.
In addition, card issuers are
sending out slightly more offers to customers with below-average credit scores.
However, the total number of offers for credit-building cards is still small.
According to Credit Suisse, credit-building card offers make up just 4 percent
of the total number of mailings sent to potential cardholders.
Interest-free offers also disappear
Some issuers are also cutting
back on promotional offers. According to Credit Suisse, issuers mailed just 206
million offers advertising a 0 percent APR on purchases -- down from 232
million offers in February 2014.
also sent fewer mailings containing a 0 percent balance transfer offer last
month. In February 2014, for example, issuers sent 225 million offers
advertising an interest-free balance transfer rate. In 2015, issuers sent 200
million 0 percent balance transfer offers.
issuers may send more promotional offers once the weather warms up and the
economy improves. According to data released March 23 by the
Federal Reserve Bank of Chicago, economic growth softened in February as
consumers trimmed their spending.
See related: Fed signals step toward higher rates
Published: March 25, 2015