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Credit card interest rates see 1st drop of 2011

Issuer replaces 59.9% APR card with 49.9% APR card, lowers national average

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CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.66%
14.74%
14.15%
Low interest 11.18%
12.03% 11.99%
Balance transfer 12.80%
12.93%
12.68%
Business 12.91%
12.91%
12.85%
Student
13.42%
13.42%
14.05%
Cash back  13.45%
12.48%
12.31%
Reward  14.33%
14.36%
14.33%
Airline 14.39%
14.39%
14.14%
Instant approval 15.99%
15.99%
15.99%
Bad credit 23.95%
24.95%
20.64%
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: 03-02-2011

Credit card interest rates declined this week for the first time in nearly three months. But it’s not all good news for consumers, as card offers for applicants with poor credit continue to be costly.

The national average annual percentage rate (APR) on new credit card offers dipped to 14.66 percent on Wednesday, according to CreditCards.com Weekly Credit Card Rate Report. The decline – by nearly a tenth of a percentage point – pushed the national average to its lowest level since mid-December.

The weekly average for five of the nine card categories also changed this week. However, the change was largely caused by updates to our database, not by recent APR changes. We updated five of the nine categories in the CreditCards.com database this week in order to better reflect recent changes to banks' promotional offers. As a result, the average APR for most categories has changed. For example, Bank of America eliminated balance transfer offers for several cards recently, so those cards were removed from the balance transfer category in our database -- causing the average APR for that category to decline.

This week's drop in the national average, in turn, was spurred by a noteworthy card change from First Premier. First Premier temporarily discontinued its First Premier Gold card – which featured a 59.9 percent APR – and replaced the Gold card with a secured card with a 49.9 percent APR. We then replaced the Gold card with the secured card in our CreditCards.com database, and the difference between the cards' APRs pushed the national average lower for the first time in 2011.

Brenda Bethke, a spokeswoman for First Premier, said by e-mail, "Premier Bankcard continues to test, review and analyze different offers to understand consumer acceptance and account performance under the regulations" of the Credit CARD Act of 2009.

Bethke did not elaborate on why the First Premier Gold card was temporarily taken off the market. However, over the past year, the card has repeatedly come under fire from consumer advocates for its extraordinarily high APR, and it is regularly cited by consumer advocates as one of the worst cards in the country. Before the CARD Act sharply limited the fees it could charge, it had boasted an APR as low as 9.99 percent. After the law went into effect, they soared as high as 79.9 percent.

First Premier Bankcard CEO Miles Beacom says that despite the high rate, the card is popular with applicants. In an interview with CNN in February, Beacom said that the card attracted a steady stream of customers – even when it had a 79.9 percent APR. He also told CNN that due to concern about regulations from the Credit CARD Act, the bank caps offers for the card at approximately 50,000 accounts a month – despite receiving anywhere from 200,000 to 300,000 applications. Bethke did not say when the Gold card would be reintroduced.   

First Premier's newest credit card, the First Premier bank credit card, has a slightly lower APR -- 49.9 percent. But it still features the highest APR that's currently available now that the Gold card is off the market, according to CreditCards.com database of card information.

Among the 100 credit cards that CreditCards.com tracks, the First Premier bank card is the most expensive card by far – beating out the card with the second highest APR for consumers with less-than-stellar credit by more than 23 percentage points. For perspective, that total difference in rates is just 1 percentage point less than the current average for cards offered to consumers with bad credit.

Bethke says that the First Premier bank card is designed to help consumers who have trouble obtaining a card because of their credit history. "The primary purpose of this credit card is to provide individuals ... with an avenue to obtain a tool to help them begin to demonstrate positive financial patterns," says Bethke. "This can help them to rebuild their credit."

No other card issuers that CreditCards.com tracks made rate adjustments this week. However, Wells Fargo made noteworthy changes to two of its promotional offers. The bank introduced a 0 percent balance transfer offer on the Wells Fargo Cash Back card and the Wells Fargo Rewards card. Both cards previously offered a promotional 3.9 percent APR on balance transfers.

The bank did not elaborate on why it made the change. However, Wells Fargo spokeswoman, Lisa Westermann indicated in an e-mail that a more favorable business climate may have prompted the move. "Our pricing reflects the current business environment," said Westermann in an e-mail. "Our intent is to continue to provide credit to as many customers as possible."

As the economy improves, 0 percent balance transfer offers have staged a comeback this year – and Wells Fargo is just one among many card issuers who have reintroduced these deals. Among the 38 cards with balance transfer offers that CreditCards.com tracks, only 12 still feature promotional balance transfer offers above 0 percent.   

According to CreditCards.com data, most cards with 0 percent balance transfer offers also feature a promotional offer period of at least 12 months. But the promotional offer period for the two Wells Fargo cards is comparably short: just 6 months. 

See related: 0 percent balance transfer offers make a comeback, An interactive guide to the Credit CARD Act, Issuer of card with 79.9 percent APR defends its product.

Published: March 2, 2011


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