Rate survey: Average card APR falls to 15.17 percent
By Kelly Dilworth | Published: June 8, 2016
The average credit card interest rate dipped this week, according to the CreditCards.com Weekly Credit Card Rate Report. After remaining at 15.19 percent for seven weeks, the national average annual percentage rate (APR) slid to 15.17 percent.
Bank of America spurred this week’s rate change by trimming the lowest available APR on the Alaska Airlines Visa Signature card by 2 percentage points. It also expanded the card’s maximum rate by nearly 5 percentage points, but that change didn’t affect the national average because CreditCards.com only factors in a card’s lowest available rate.
Alaska Airlines fans are now offered a range of APRs that starts at 12.49 percent and maxes out at 19.49 percent.
The sporting goods store Cabela’s also altered interest rates this week. It boosted the minimum APR on the Cabela’s Club Visa card from 15.43 percent to 15.45 percent. The modest increase was overcome in our calculation by the larger cut from the Alaska Airlines card.
Rate hikes coming, but probably not in June
Despite this week’s dip in average interest rates, the average card APR remains near record highs. The national average APR rose above 15 percent in December 2015 after the Federal Reserve increased its benchmark interest rate by a quarter of a percent.
Nearly all credit cards passed that rate hike along to consumers, and that took the natinoal average APR up with it, from about 14.9 percent to its current level above 15 percent.
Earlier this year, the Federal Reserve signaled that it planned to raise rates again in 2016, which would cause additional widespread increases in credit card interest rates. When the Federal Reserve changes the federal funds rate, the U.S. prime rate changes as well, causing card issuers and other short-term lenders to also increase their rates.
However, cardholders may have a longer reprieve on higher interest rates than economists initially expected. In a speech delivered June 6, Federal Reserve Chair Janet Yellen called for additional increases in the federal funds rate, but acknowledged that economic uncertainty from a softening labor market could change the Federal Reserve’s timeline. The Labor Department reported June 3 that the economy added only 38,000 jobs in May.
The rate-setting committee is scheduled to meet June 14 to June 15 to decide on another potential rate hike, but the Fed may decide to wait until its July meeting or another meeting in the fall to increase the federal funds rate. It will also release additional economic projections in June, which could give cardholders a better idea of when their rates will likely increase.
Card debt continues to expand
Despite somewhat higher credit card interest rates, consumers don’t appear to be curbing their spending. The Commerce Department reported May 31 that consumer spending jumped by a full percentage point in April, bolstering card issuers’ hopes that consumers are ready to charge more retail purchases to their cards.
According to a report June 7 from the Federal Reserve, credit card balances expanded by more than 2 percent in April after jumping by more than 13 percent in March. As a result, the total amount of debt cardholders carried jumped to $949.8 billion – a nearly seven-year high. The last time cardholders carried around this much revolving debt was in the summer of 2009.
|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: June 8, 2016|