Credit card Interest rates fall for first time since May

By Jeremy M. Simon

Credit card interest rates fell last week for the first time in more than two months, according to CreditCards.com's Weekly Rate Report. 

They didn't fall much, but interest rates on new credit card offers did drop, after Citi adjusted annual percentage rates (APRs) on two products. Those changes lowered the national average rate to 14.42 percent, marking a break from the recent upward APR trend: In the nine weeks since the last decline, APRs have increased six times and remained unchanged three times.

Among Citi's moves, the Citi Forward card was changed from a fixed APR of 14.24 percent to a range of 12.99 percent to 19.99 percent. The issuer also barely adjusted the APR range on its mtvU Platinum Select Visa Card for College Students from between 12.99 percent and 20.24 percent to between 12.99 percent and 19.99 percent. However, because the national average is calculated using only the low end of any APR ranges, only the change to the Citi Forward card brought overall rates lower. 

Issuers see delinquencies fall
In its recent earnings announcement, Citi said its credit card revenues in North America declined in the second quarter due to the Credit CARD Act and reduced card use, with average card loans down as a result of higher payment rates and fewer accounts. Still, it wasn't all bad news for the bank. Citi reported that card delinquencies -- or late payments -- declined as cardholders apparently did a better job of repaying their loans. 

Citi wasn't the only bank that experienced fewer late payments. Wells Fargo announced that it suffered fewer losses across several areas of the business, including credit cards."We also saw improvement in early indicators of credit quality, with improved 30 day delinquencies in many portfolios, including business direct, credit card, home equity, student lending and Wells Fargo Home Mortgage," chief credit and risk officer Mike Loughlin said in the company's press release.

In an effort to prevent losses, banks have kept lending standards tight, leading to higher costs for borrowers. For example, a typical cardholder who borrowed $5,000 on a credit card today and consistently paid $150 per month at today's average interest rate would have to pay $6,427 to pay off the debt. That's $168 more than would have been required six months earlier, although the difference in cost has continued to lessen over recent weeks. (Calculator: How long will it take to pay off your credit card balance?)

Published: July 21, 2010

	Three most recent Research, statistics stories: Rate survey: Credit card rates hold steady for 2nd week – The average interest rate on a new credit card offer remained unchanged this week, according to the CreditCards.com Weekly Credit Card Rate Report, though issuers are still tweaking APRs ... Consumer credit card balances keep rising, Fed says – Consumer credit card balances moved higher in December, as more Americans pulled out their cards for the holidays. But experts say that a return to holiday shopping may not be the only reason why consumers saw their balances swell ... Rate survey: Credit card rates hit lowest levels in 5 months – Interest rates on new credit card fell to their lowest levels since August 2011 this week, according to the CreditCards.com Weekly Credit Card Rate Report ...

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