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Credit card interest rates rise on Chase, Cap One changes

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Interest rates on new credit card offers inched up this week, following rate hikes from Capital One and Chase.  

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.37%
14.35%
14.42%
Low interest 11.93%
11.93% 12.11%
Cash back  12.70%
12.70%
12.57%
Balance transfer 12.83%
12.83%
12.81%
Business 13.05%
13.05%
12.96%
Reward  14.28%
14.41%
14.49%
Airline 14.45%
14.45%
14.43%
Student
14.49%
14.49%
14.10%
Instant approval 16.49%
16.49%
18.41%
Bad credit 21.04%
21.04%
20.32%
Methodology: The national average credit card APR is comprised of about 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: 10-20-2010

The national average annual percentage rate (APR) rose to 14.37 percent, according to the CreditCards.com Weekly Credit Card Rate Report, its highest level since early August. APRs have increased three out of the past four weeks.   

The latest jump was driven by Capital One, which hiked the APR for new applicants on its No Hassle Cash Rewards card for borrowers with excellent credit, and Chase, which boosted the rate on its Marriott Rewards Visa Signature card. Cap One didn't provide comment, but Chase said its pricing changes are in reaction to numerous factors, with APRs adjusted whenever appropriate for cardholders and the company.

The latest bank moves included more than just APR increases. Bank of America continued its exit from the student/alumni card market, eliminating its Ohio State University Alumni Association WorldPoints Platinum Plus MasterCard offer. That exit follows the Credit CARD Act of 2009, which restricts lending to students and makes the terms of college affinity card agreements between schools and card issuers more transparent.

While BofA may be leaving the student space, it continues lending elsewhere. "Bank of America continued to support the economic recovery by extending approximately $173 billion in credit in the third quarter of 2010, according to preliminary data," the company said in its third-quarter earnings announcement, including $3 billion in the domestic consumer and small business card area.

Banks have increased lending as borrowers' credit card bills appear increasingly likely to get paid. According to a Moody's Investors Service report released Monday, card issuers are seeing lower rates of delinquencies and charge-offs, or uncollectable debt. Moody's expects those trends to continue. "Charge-off rates across the industry could be another 10 percent to 15 percent lower by first-quarter 2011," Moody's said in its weekly credit outlook report.

But that doesn't mean banks are lending at a discount. As a result, 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 $6,420 to pay off the debt. That's $186 more than would have been required on Jan. 1, 2010, when the national average APR for new card offers was 12.97 percent. (Calculator: How long will it take to pay off your credit card balance?)

Although the recent recession left many borrowers unable to repay their lenders, banks have raised rates and tightened lending standards to guard themselves against any future economic turbulence. Bank of America, for one, says it is ready. "We are adapting to the regulatory environment, credit quality continues to improve, and we are managing risk and building capital," BofA chief executive Brian Moynihan said in the earnings release. "We are realistic about the near-term challenges, and optimistic about the long-term opportunity."    

See related: Era of readily available credit cards for young adults ends, Credit card lending standards loosen for 1st time in 3 years, Credit card reform arrives in the form of the Credit CARD Act, Calculator: How long will it take to pay off your credit card balance?Credit card rates: interactive graphic on APR changes

Published: October 20, 2010


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