Wells Fargo move boosts credit card interest rates
Interest rates on new credit card offers rose slightly this week, according to the CreditCards.com Weekly Credit Card Rate Report, after Wells Fargo increased the rate on a card.
|CreditCards.com's Weekly Rate Report|
|Avg. APR||Last week||6 months ago|
|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.)|
The national average annual percentage rate (APR) reached 14.35 percent, after falling the prior two weeks. This week's rebound was spurred by Wells Fargo's decision to hike the rate on a card that's aimed at customers with poor or thin credit.
Wells Fargo raised the APR on its secured card from 17.49 percent to 18.99 percent. When reached for comment, Wells Fargo said that as a normal course of business, it evaluates pricing and rate structures. "Our pricing reflects the current business environment," says Lisa Westermann, assistant vice president of public relations. "Our intent is to continue to provide credit to as many customers as possible," she says.
It wasn't the only lender adjusting rates. Discover trimmed the top end of the APR range on its Escape card, lowering rates from between 10.99 percent and 18.99 percent to between 10.99 percent and 15.99 percent. A Discover representative said that due to competitive reasons, it is unable to comment on its marketing strategies.That rate change, however, has no impact on the national average, since CreditCards.com only looks at the low end of any APR ranges.
Interest rates have been on the upswing this year. 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 $6,417 to pay off the debt. That's $183 more than would have been required on Jan. 1, 2010. (Calculator: How long will it take to pay off your credit card balance?)
Federal Reserve data confirm the increased cost of borrowing on plastic. In its latest survey of senior loan officers, 11 percent of banks told the Fed that they raised APRs on new or existing credit card accounts in the second quarter. That's nearly four times the number of banks that said they lowered rates during the April to June period. However, the vast majority of banks -- about four in five, according to the survey -- left APRs unchanged. That's a major change from surveys from recent years that sometimes showed half of banks tightening their lending standards.
See related: Credit card lending standards keep tightening, Fed report says, 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
Updated: August 25, 2010
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