Feb. 25, 2015: Average rates on new card offers fell Wednesday for the first time in nearly two months, according to the CreditCards.com Weekly Credit Card Rate Report.
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|CreditCards.com’s Weekly Rate Report|
|Avg. APR||Last week||6 months ago|
|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.)|
|Updated: Feb. 25, 2015|
Average rates on new card offers fell Wednesday for the first time in nearly two months, according to the CreditCards.com Weekly Credit Card Rate Report.
The national average annual percentage rate (APR) slid to 14.87 percent after U.S. Bank lowered the APR on its Secured Visa card from 20.99 percent to 18.99 percent. The rate change caused the average APR for subprime cards to fall to 22.48 percent — a more than four-year low.
Most issuers have left card rates alone since 2014. However, according to spokeswoman Elizabeth Crosta, American Express recently notified “a small percentage” of its 37 million U.S. cardholders that it’s raising rates on existing card accounts by an average of 2.5 percentage points.
“We looked at all of our rates and found that some card members had rates that are significantly lower than market rates,” says Crosta. For example, some cardholders were being charged interest rates as low as 3.25 percent. The average APR for low interest cards, by contrast, is currently 11.53 percent.
After reviewing cardholder accounts for several months, American Express began sending out notices in early February to cardholders who were paying below market rates.
“We made this change to better align APRs with average APRs offered for similar cards in the marketplace,” said Crosta in an email. The changes are also intended to make the rates charged to existing American Express customers more comparable with the rates offered to new customers, she says.
For example, the lowest available rate on a new American Express card is currently 12.99 percent. “If you were to apply today, that would be the lowest rate you would get,” says Crosta.
“For these card members, the new APR is no higher than if they applied for a comparable American Express card today,” added Crosta in an email.
Standard APRs aren’t the only credit card terms being changed, according to notices reviewed by CreditCards.com. Some American Express cardholders are also receiving notices about changes to penalty APRs, which are applied when a customer misses a payment.
For example, one cardholder in Columbus, Ohio, was notified earlier this month that the penalty APR on his American Express Blue card was being increased from 27.24 percent to 29.24 percent. His standard purchase APR of 15.24 percent was left unchanged. In the disclosure, dated Feb. 11, American Express told the customer his current penalty APR was “lower than typical penalty APRs for similar cards in the marketplace” and so it was being increased to make it more comparable.
According to Crosta, “it has been some time” since American Express raised interest rates for a significant number of existing cardholders, but the card issuer has been thinking about changing cardholders’ rates since 2014. “Over time, there are changes in the industry, changes to credit profiles and over time, we look at those factors,” she says. This is a common practice for card issuers, she adds. “We do look at rates all the time.”
What to do if you receive a rate increase
If you receive notification of a rate increase on an existing credit card, don’t panic. You have some time to sort out your finances and decide whether it’s worth keeping the card.
Under the Credit CARD Act of 2009, card issuers must give you at least 45 days’ advance notice of a rate increase and they must also give you the same amount of time to decide whether to accept the hike. If you decide to opt out and close your account, you will be charged your current rate until you repay your balance in full.
Be careful about new purchases, however. The lower rate only applies to your existing balance prior to the rate increase. If you decide to use the card after you receive notice of a rate hike, you may have just a few weeks left before the new card APR is applied to new purchases.