Credit card interest rates hold steady at 15.07 percent
By Kelly Dilworth | Published: October 15, 2014
|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: Oct. 15, 2014|
Average rates on new card offers didn't budge this week, according to the CreditCards.com Weekly Credit Card Rate Report.
The national average annual percentage rate (APR) remained at 15.07 percent Wednesday for the third consecutive week.
None of the cards tracked by CreditCards.com advertised new interest rates. Promotional balance transfer offers and introductory APRs also remained unchanged.
Average rates on new card offers are currently near record highs. In September 2013, the national average APR rose to 15.02 percent after hovering between 14.96 percent and 14.99 percent for 10 months. It hasn't fallen below 15 percent since.
Average rates on new card offers have inched up every year since 2010, when the Credit CARD Act of 2009 went into effect. The national average APR for the year is currently 15.03 percent. In 2013, the average APR for the year was 14.98 percent.
Experts say that lenders have slowly increased rates in order to help make up for the loss in revenue from the CARD Act, which barred issuers from the raising rates any time for any reason. Since card issuers can no longer hike rates on existing accounts without giving at least 45 days' advance notice, many lenders are offering higher rates upfront.
Before the CARD Act went into effect, the average APR for 2009 was 12.34 percent -- nearly 3 percentage points lower than it is now.
Higher rates haven't deterred applicants from applying for new cards, however.
Issuers boost lending
Credit card holders are showing increased interest in new credit, according to multiple reports, and lenders are responding by issuing more cards to a wider range of applicants.
For example, Bank of America reported on Oct. 15 that it approved more than 1.2 million new cards in the third quarter of 2014 -- up from 1 million new cards in the third quarter of 2013.
Sixty-four percent of those cards went to current Bank of America customers. Thirty-six percent went to applicants who didn't have a previous relationship with the bank.
Similarly, Wells Fargo reported on Oct. 14 that the number of Wells Fargo customers with a Wells Fargo credit card jumped to 39.7 percent in the third quarter -- up from 36 percent in the summer of 2013.
Research from the credit bureau TransUnion also found that credit card lending is picking up. In the first quarter of 2014, for example, consumers opened nearly 18 percent more accounts than they did the previous year. In addition, TransUnion found that slightly more of those cards belonged to cardholders with subprime credit scores -- indicating that banks are becoming less picky about their customers.
Card spending continues to rise
Banks are also processing more transactions, which has helped boost their total fee revenue.
Credit card issuers charge retailers a transaction fee every time you swipe your card, and that's become an important source of revenue for card issuers -- particularly now that so many cardholders avoid paying interest by paying off their balances in full each month.
Chase said in its Oct. 14 earnings report that it processed 6 percent more transactions in the third quarter of 2014 than it did the previous year. Meanwhile, spending on Chase-issued cards rose 12 percent in the third quarter, compared to 2013. Customers also carried slightly larger balances, said Chase.
A separate report, released by First Data Corp., also showed that credit card spending is steadily increasing. Total card spending grew 5 percent last month, according to First Data Corp., after rising by 5.8 percent in August.
Consumer spending on debit cards using a PIN, by contrast, increased by just 1.9 percent in September. Spending on debit cards using a customer's signature grew by 1.1 percent.
According to First Data's Krish Mantripragada, last month's growth in credit card spending is partially due to issuers' increased willingness to lend. "We continue to see lenders make credit more readily available," said Mantripragada in a news release, and that's given cardholders substantially more room to spend.
See related: Study reveals rewards cards' boom in popularity