Rate survey: Credit card interest rates remain stuck at 15.01 percent

But issuers lengthen interest-free balance transfer periods

By's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 15.01%
Low interest 10.37%
10.37% 10.46%
Balance transfer 12.64%
Business 12.80%
Cash back 14.91%
Airline  15.30%
Reward 14.97% 14.97%
Instant approval 28.00%
Bad credit 22.73%
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: May 21, 2014

Average rates on new credit card offers didn't budge this week, according to the Weekly Credit Card Rate Report.

The national average annual percentage rate (APR) remained at 15.01 percent Wednesday for the third consecutive week.

Interest rates on cash-back credit cards inched up slightly this week to 14.91 percent. However, that was due to a reshuffling of the database, rather than a rate change. Bank of America removed the BankAmericard Privileges card from its website, so replaced it in the database with another rewards credit card.

Most issuers tracked by left credit card terms alone this week. Bank of America eliminated the 0 percent balance transfer offer on the MLB BankAmericard. However, it left the sports rewards card's 0 percent offer on purchases intact. Major League Baseball fans still have 12 months to make interest-free purchases.

Promotional offers on the rise
Despite nixing the balance transfer offer on one of its rewards cards, Bank of America continues to rely heavily on 0 percent promotional offers to lure new customers. So do most other credit card issuers, according to an analysis by the financial services firm Credit Suisse.

Analyzing data from the market research firm Mintel Comperemedia, Credit Suisse found 0 percent promotional offers are becoming increasingly popular with credit card issuers. For example, in April of 2014, issuers mailed 279 million credit card offers featuring a 0 percent APR on purchases -- up from 254 million offers the year before.

Issuers also mailed substantially more offers with a 0 percent balance transfer promotion. For example, among the 342 million offers issuers sent in April, 269 million (79 percent) contained a 0 percent balance transfer offer. That's up from 194 million offers in April 2013.

In addition to sending out more offers containing at least some type of 0 percent promotion, issuers are once again lengthening the amount of time consumers have to take advantage of an offer, after trimming them sharply earlier this year. For example, in April 2014, the typical balance transfer period rose to an average of 16.5 months, according to Credit Suisse -- up from an average of 14.2 months in March.

Analysts at Credit Suisse predict issuers will continue to rely heavily on 0 percent APRs for some time. However, the amount of time new consumers have to take advantage of these offers could vary considerably.

Since January 2011, for example, the typical balance transfer period on offers has oscillated sharply from month to month. Most of the time, the average balance transfer period has hovered between 14 months and 20 months, on average. However, it has bounced up and down significantly from month to month.

During one particularly competitive period in 2012, the average balance transfer period shot up to an average of 24 months before falling back down to just over 14 months the following month. The average balance transfer length hasn't risen above 20 months since July 2013.

Competition continues to increase
Analysts keep a close watch on credit card mailings in order to get a sense of how fiercely card issuers are competing for new customers.

When the total number of credit card mailings goes up, that typically means credit card issuers are pouring more resources into netting new cardholders and edging out the competition. When competition between issuers increases, cardholders frequently see better offers in their mailboxes, including more enticing terms and promotions.

Since 2013, the number of offers issuers mail to potential cardholders has increased substantially.  In April 2014, for example, issuers mailed 9 percent more card offers than they mailed the previous month and 8 percent more card offers than they mailed the previous year.

That's especially significant considering that issuers typically mail slightly fewer card offers in April than they do in other months, according to Credit Suisse. "Mailings are seasonally 5 percent lower, month-over-month in April," wrote Credit Suisse in a May 20 report.

As the year goes on, analysts predict that credit card offers will become even more ubiquitous than they are now. For example, by the end of 2014, analysts at Credit Suisse project that card issuers will have mailed 4.9 million offers to consumers' homes. If Credit Suisse's prediction holds true, that will be the largest number of offers issuers have mailed since 2008.

The increases indicate to analysts that card issuers are becoming increasingly hungry for new applicants. That could mean that cardholders will continue to see more generous promotions in the future -- and that people with good credit have reason to bargain hunt for new credit cards or room to negotiate with their existing issuer. 

Last week's survey: Rate survey: Credit card interest rates remain at 15.01 percent

Published: May 21, 2014

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