Survey: Average card rates sit tight at 14.96 percent
Average rates on new credit card offers stayed put this week, according to the CreditCards.com Weekly Credit Card Rate Report.
For the second week in a row, issuers left interest rates unchanged. As a result, the national average annual percentage rate (APR) remained at 14.96 percent. Issuers also left promotional APRs and balance transfer offers intact this week.
Interest rates on new credit card offers are currently at their lowest point in more than six months. After remaining below 15 percent for the first five months of 2015, average rates rose to 15 percent at the end of June and remained there for a record-setting 16 consecutive weeks. Interest rates increased slightly to 15.01 percent in mid-October before dropping to 14.96 percent the following month.
Since January, rates have increased just five times and fallen three times.
Card lending helps drive bank profits higher
Banks profits continued to expand last quarter, thanks in part to increased consumer lending. According to research released Nov. 24 by the Federal Deposit Insurance Corp., total consumer loan and lease balances, including credit card, mortgage and auto loans, expanded by nearly 6 percent last quarter compared to the previous year. "This is the largest 12-month growth rate since mid-2007 to mid-2008," said the FDIC in a news release.
Smaller banks saw even more robust growth. According to the FDIC’s quarterly bank earnings report, loan and lease balances at community banks grew by 8.5 percent, year-over-year.
Consumers bought more homes and cars in the third quarter. They also charged more to their cards. On a quarterly basis, credit card balances grew by $13.6 billion between the second and third quarters.
"Robust loan growth was the driving factor behind another strong quarter for America’s banking industry," said the American Bankers Association’s James Chessen in a same-day analysis of the FDIC's findings. "Lending served as the primary driver of the growth in bank assets as the bread and butter of the banking industry."
According to Chessen, businesses and consumers are taking advantage of historically low interest rates, which are expected to rise soon when the Federal Reserve raises the federal funds rate for the first time in seven years. Consumers are also becoming more confident about borrowing after remaining unusually cautious for years. "Consumer credit growth reflects the hard work people have done to regain their financial footing after the Great Recession, which gives them the necessary leeway to responsibly take on more credit," says Chessen.
Banks, meanwhile, are granting more credit to consumers with lower credit scores, in part because it’s much less risky to lend these days.
According to the FDIC, late and uncollectible payments declined again last quarter as consumers continued to pay their bills on time.
"Asset quality sustained its five-year trend of improvement as cautious behavior on the part of both banks and borrowers continued to pay off," said Chessen. "Loan losses have now returned to pre-crisis levels," which could mean that banks will become even more generous with credit over time as their balance sheets improve. "Underwriting standards will naturally adjust to reflect an improving economy and lower risk of lending," he says.
As a result, consumers with low to middling credit scores could have an even easier time in the future qualifying for loans with reasonable rates.
|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: Nov. 25, 2015|
See related: Fed report: Access to credit cards easing