Rate survey: Credit card interest rates stay flat

Interest rates on new credit card offers remained flat for the second consecutive week, according to the CreditCards.com Weekly Credit Card Rate Report.

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.92%
Low interest 10.40%
10.40% 11.17%
Balance transfer 12.46%
Business 12.67%
Cash back  14.24%
Airline  14.63%
Reward 14.71%
Instant approval 15.49%
Bad credit 23.64%
Methodology: The national average credit card APR is comprised of 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: June 20, 2012

The national average annual percentage rate (APR) on new card offers stayed put at 14.92 percent Wednesday.

None of the cards that CreditCards.com tracks featured offer changes this week. That includes changes to promotional balance transfer offers, promotional APRs and annual fees.

The lack of changes to new card offers has made comparing credit cards much more predictable than in previous years when issuers tested different promotions and rates more often. In the past three months, credit card short-term promotions on purchases balance transfers have remained unchanged seven weeks out of 12. As a result, consumers applying for a new card are more likely to see the same promotional offer from week to week.

Consumers are also more likely to see the same APR (or APR range) on a card they're considering. In the past six months, for example, average APRs have remained unchanged 14 weeks out of 24. Meanwhile, when average rates have moved up or down, the movement has been by less than a tenth of a percentage point most weeks.

That said, the lowest possible rate on a new credit card may still be higher than it was in previous years. In the past year, average rates have moved below 14.7 percent only once and have hovered closer to 15 percent for most of the year. By contrast, the national average APR clocked in at just 11.94 percent during the same period in 2009.  Experts say that a combination of sluggish economic growth and federal regulations (including the Credit CARD Act of 2009) helped push average interest rates up.

Fed: No federal rate hike on the horizon until mid-2014
The good news is that cardholders with a variable rate card are unlikely to see a sudden rate hike any time soon. The Federal Reserve Open Market Committee (FOMC) voted Wednesday to keep the federal funds rate at rock bottom.  

As a result, credit cards that are tied to the prime rate, which is typically 3 percentage points above the federal funds rate, won't see an automatic rate hike.

Most U.S. credit cards are variable rate cards, tied to the U.S. prime rate. That means that when the Federal Reserve does decide to increase the federal funds rate, most cardholders will see their card APRs shoot up as well.

The rise, in turn, could be steep, warn experts. In mid-2008, the Federal Reserve pushed interest rates way down in order to help prop up an economy in free fall. Since then, the Federal Reserve has declined to raise rates in an effort to encourage consumers and small businesses to borrow.

However, prior to 2008, the federal funds rate stood at 4.25 percent -- 4 full percentage points higher than it is now. Experts predict that when the federal funds rate does eventually go up, it will do so by several points.

To get a sense of just how big a change that could make to consumers' pocketbooks, consider this. If a cardholder borrows $5,000 on a new credit card today at 14.92 percent interest and pays $100 monthly, they will have to pay $2,867 in interest to clear their balance. However, if the Federal Funds rate were raised to 4.25 percent, that same cardholder would have to pay $2,059 more in interest charges (or $4,926 total) to be debt-free. (Calculator: How long will it take to pay off your credit card balance?)

See related: Fed votes again to keep borrowing costs down

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Updated: 01-19-2019