Credit card APRs steady, though banks are tweaking other terms

Issuers scrambling to keep up profits in face of new credit card rules

Even as banks continue to tinker with their business models in reaction to new credit card legislation, the national average annual percentage rate on new credit card offers was unchanged this week at 12.17 percent, according to the Weekly Credit Card Rate Report.'s weekly rate chart
  Avg. APR Last week 6 months ago
National average 12.17% 12.17% 12.93%
Balance transfer  10.14% 10.14% 11.18%
Low interest 10.62% 10.62% 12.38%
Business 11.07% 11.07% 16.74%
Cash back 11.77% 11.77% 13.76%
Rewards 12.16% 12.16% 12.22%
Instant approval 12.99% 12.99% 11.29%
Airline 13.48% 13.48% 13.25%
Bad credit 14.29% 14.29% 13.18%
Student 14.45% 14.45% 15.94%
Methodology: The national average credit card APR is comprised of 95 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.)
Updated: 9-3-2009

Experts say cardholders could experience changes amid banks' ongoing uncertainty about how to best respond to the Credit CARD Act. That legislation has encouraged banks to "experiment cautiously" in an effort to preserve their profitability while following the new rules, says Bruce Cundiff, director of payments research and consulting with Javelin Strategy & Research.

In the first phase of the legislation -- which began on Aug. 20 -- cardholders may now opt out of interest rate hikes and other major changes. Based on that provision, credit card issuers must give consumers 45 days' warning of interest rate hikes, fee increases and other significant changes in terms. When they mail notices of these changes, they must inform card users of their right to opt out -- to close their accounts and pay off the balance at the existing, lower APR.

Banks have made adjustments. After a period of rising interest rates, cardholders may now find other perks being scaled back. "A lot of the shifts that card issuers are making to their portfolios are the result of uncertainty surrounding the CARD Act," says Cundiff. According to data collected by, those shifts, in some cases, include higher minimum payments and introductory APRs, as well as the elimination of cardholder travel insurance.

In order to stay profitable, banks have to become stingier in some areas of their business. "They are working in a situation where they have to more closely scrutinize profitability of card portfolios -- and that means fewer rewards for individuals," Cundiff says.

According to Cundiff, the direction of rates is anything but definite. "We've seen a lot of uncertainty, and that's going to continue. I don't know what that's going to mean in terms of stabilization up or stabilization down" for APRs, he says. 

One thing that does seem likely: Any additional APR changes over the near term are unlikely to stem from the Federal Reserve. Based on minutes from the Fed's most recent meeting, policymakers appear content to leave their key lending rate -- called the federal funds rate -- at historically low levels for the time being. That fed funds rate is used to set banks' prime rates, to which the APRs for variable rate credit cards are generally tied. 

Most Fed participants expect "subdued and potentially declining wage and price inflation over the next few years; a few saw a risk of substantial disinflation," the Fed said. Since the central bank generally raises interest rates in an effort to cool an overheating economy and prevent inflationary pressures from driving up prices, concerns over disinflation suggest that rates will stay unchanged. 

Meanwhile, as banks continue to test various approaches, borrowers should be ready. "Consumer should definitely make themselves aware of those changes in the relationship they have with their card issuers so it doesn't hit them unexpectedly," Cundiff says. "Consumer education is key; in some cases, self education." He recommends that cardholders stay in touch with their banks, calling their card issuer with any questions that arise. 

If cardholders get an answer from the bank they don't like, they still have options. "The possibility exists to shop around, based on satisfaction or dissatisfaction with terms," Cundiff says.

See related: 1st phase of credit card law reform kicks in

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Updated: 03-22-2019