Interest rates stay steady, but 59.9 percent APR reappears
Subprime issuer reintroduces sky-high rate for some applicants
By Jeremy M. Simon | Published: August 25, 2010
The national average interest rate on new credit card offers was unchanged this week, according to the CreditCards.com Weekly Credit Card Rate Report, even as one issuer reintroduced an extremely high rate.
|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.)|
Interest rates held steady, with the mean annual percentage rate (APR) still at 14.35 percent, after rising last week. There were no changes to the APR database, even as First Premier -- which targets customers with bad credit -- adjusted the rate on one of its credit cards.
Some online offers for First Premier bank's Centennial Classic card showed an APR of 59.9 percent. That compares with the card's existing rate of 23.9 percent that some applicants will continue to find, depending on how they reach the Centennial Classic offer through the Internet. First Premier had previously charged an exceedingly high APR of 59.9 percent for its Gold MasterCard -- a card discontinued by the bank in March.
First Premier did not respond to a request for comment.
When a card offers a range of APRs, we use the lowest rate when calculating our national average. Because we found two available rates for the Centennial Classic card, we chose not to alter the national average to reflect the higher rate.
Rates still rising
Still, CreditCards.com data shows APRs for new card offers have risen this year. As a result, a typical new 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?)
But rates aren't only increasing for new borrowers. According to market research firm Synovate, the average rate on existing cards reached 14.7 percent in the second quarter, the highest level in nine years.
As borrowing on plastic grows more expensive, cardholders continue to reduce their debt levels. Credit bureau TransUnion reports that the average credit card borrower's debt fell 4.1 percent to $4,951 in the second quarter of 2010. TransUnion said this marks the first time since early 2002 that credit card debt dropped below $5,000. "The last five quarters of consecutive decreases in credit card balances show that consumers continue to pay down their credit cards in response to economic uncertainty and high unemployment," Ezra Becker, director of consulting and strategy in TransUnion's financial services business unit, said in a company press release.
See related: Interest rates fall as 59.9% APR credit card goes away, 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
- CFPB: Many low-income consumers start credit on a bad note – Lower-income consumers are more likely than those with higher incomes to become "credit visible" with negative items, according to the CFPB ...
- Fears rise of consumer debt delinquency, N.Y. Fed survey shows – Fear of missing a minimum debt payment rose for the third month in a row in May, according to the Federal Reserve Bank of New York Survey of Consumer Expectations ...
- Fed: Card balances rise $1.5 billion in April – Credit card balances continued to creep toward an all-time high in April, according to a federal report released Wednesday ...