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Survey: Average card APR stays at record high of 15.36 percent

By  |  Published: January 11, 2017

The national average APR on new credit card offers remained at a record high this week, according to the CreditCards.com Weekly Credit Card Rate Report. For the second week in a row, the average card APR sat at 15.36 percent, which is the highest national average that CreditCards.com has recorded since it began tracking rates in mid-2007.

Average rates on new card offers rose to record highs in December after the Federal Reserve bumped up the benchmark interest rate, the federal funds rate, by 0.25 percent.

Since then, nearly every major card issuer increased rates by the same amount.

After tweaking rates in response to the Federal Reserve’s December rate hike, most issuers left APRs alone this week. PNC Bank increased rates on its business cards by 0.25 percent. But the change was too small to affect the national average.

Card delinquencies rise
As card APRs rise, analysts have warned that consumers may have trouble paying their bills on time. In December, the credit bureau TransUnion projected that credit card delinquencies – late payments by 30 days or more &nprod; would spike over the next year as consumers struggled to absorb higher interest charges.

The Federal Reserve is expected to increase rates again later this year, which could make card balances even costlier. Most card issuers tweak APRs on new and current card accounts when the Federal Reserve revises its benchmark interest rate. The rate increases are typically small, but the cumulative impact of multiple quarter-point rate increases could push some consumers over the financial edge, say analysts.

Already, a growing number of consumers are struggling to keep up with their bills, according to new research from the American Bankers Association. The trade group announced Jan. 10 that bank card delinquencies rose again in the third quarter of 2016 to 2.74 percent of all accounts.

Late payments on bank cards are still relatively rare by historical standards. The 15-year average for bank card delinquencies, for example, is 3.68 percent – well above the current rate. But late payments have become more frequent in recent months as more consumers with lower credit scores obtain credit cards. After remaining exceptionally cautious in the first several years after the Great Recession, banks have become more likely in recent years to approve new cardholders with damaged credit.

“The overwhelming majority of consumers continue to pay their credit card bills on time, with late payments holding near historical lows,” said the American Bankers Association’s James Chessen in a news release. “These types of fluctuations don’t come as a surprise amid a six-year period in which bank card delinquencies have been so far below their long-term average.”

According to Chessen, late payments have remained near historic lows, despite more cards going to consumers with lower scores, because banks have been reluctant to grant large credit lines to consumers with negative credit histories. “Banks have worked to ensure that credit lines start off at conservative levels and only increase for borrowers with a good payment history and a proven ability to meet their obligations,” said Chessen.

According to the American Bankers Association’s latest Credit Card Market Monitor, the average credit line granted to new cardholders with subprime credit scores is just $2,466. The average credit line for consumers with pristine credit, by contrast, is $9,618.

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 15.36% 15.36%
15.18%
Low interest 12.16%
12.16% 11.98%
Cash back 15.51%
15.51%
15.32%
Balance transfer 14.61%
14.60%
14.38%
Business 13.39%
13.37%
13.12%
Student 13.67%
13.67%
13.42%
Airline 15.35%
15.35%
15.08%
Reward  15.44%
15.44%
15.29%
Instant approval 18.00%
18.00%
18.04%
Bad credit 22.98%
22.98%
22.56%
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.)
Source: CreditCards.com
Updated: Jan. 11, 2017

See related: Poll: Americans more optimistic about being debt-free, Study: Rising interest rates will impact 92 million in the U.S.

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Updated: 08-18-2017

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