March 25, 2015: Average rates on new credit card offers inched up this week for the first time in nearly five months, according to the CreditCards.com Weekly Credit Card Rate Report
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The national average annual percentage rate (APR) rose to 14.9 percent Wednesday after TD Bank increased the minimum APR on the TD Easy Rewards Visa from 9.99 percent to 12.99 percent.
The East Coast bank also lowered the card’s maximum APR from 23.24 percent to 22.99 percent, but that change didn’t affect the national average because CreditCards.com considers only a card’s lowest APR when calculating average rates.
Capital One also introduced new rates this week. Cardholders who qualify for the Venture Rewards card are now offered a wider range of APRs, starting at 12.9 percent and topping out at 22.9 percent. Applicants were previously offered a narrower range of 13.9 percent to 20.9 percent.
Card issuers cut promotional spending
Card issuers have pared back the number of card offers they mail to potential customers, according to new estimates from financial services firm Credit Suisse.
In February, issuers mailed just 283 million offers — 8 percent fewer than mailed in January and 6 percent fewer than the year before. In January, credit card mail volume also dropped compared to 2014.
Last month’s modest cutbacks could mean issuers aren’t competing nearly as aggressively for new cardholders. “Mail volume is an important measure of the competitive landscape,” wrote Moshe Orenbuch, Lesley Robertshaw and James Ulan in a March 23 research note. As a result, consumers may see fewer enticing offers in their mailboxes — at least until issuers decide to ramp up their promotional spending.
When issuers fiercely compete for new customers, they often flood potential cardholders’ mailboxes with tempting offers promising extended interest-free promotions and other perks. But external factors, such as a softened economy, sometimes prompt card-issuing banks to cut back.
During the Great Recession, for example, credit card mail volume fell dramatically as issuers retrenched and focused on attracting the most-creditworthy consumers. Since then, card mail volume has picked up somewhat as issuers compete more aggressively for a broader group of customers. But credit card mail volume is still far from pre-recession levels. In 2006, issuers mailed approximately 8.1 billion offers. In 2014, issuers mailed less than half that amount, sending out just 4 billion offers.
Analysts at Credit Suisse predict consumers will see more offers as the year goes on, as it estimates total mail volume will increase to 4.2 billion offers by the end of 2015, which would be the largest number of offers mailed since 2011. “This is based upon commentary from several of the large players that they will be increasing their marketing spending in 2015,” wrote Orenbuch, Robertshaw and Ulan in the note. “However, year-over-year growth rates have been decelerating.” So card issuers may wind up mailing out fewer offers than promised.
American Express, in particular, is expected to ramp up its promotional spending over the next year as the company tries to make up for lost customers. Two major co-branded credit card partners — Costco and JetBlue Airways — recently decided not to renew their contracts with the card issuer. As a result, American Express has been forced to come up with new ways to increase revenue.
In February, American Express announced it was offering double the rewards for restaurant purchases on its Gold line of credit cards and boosting some of its travel perks. Around the same time, news broke that it was also increasing rates for a some cardholders who have been enjoying below-market APRs. In addition, American Express announced last week a new loyalty program that allows cardholders to earn rewards points even when using other forms of payment, such as cash and debit cards.
Meanwhile, Discover is also expected to ramp up its promotional spending as it markets the new Discover “it” Miles card, said Credit Suisse.
In addition, card issuers are sending out slightly more offers to customers with below-average credit scores. However, the total number of offers for credit-building cards is still small. According to Credit Suisse, credit-building card offers make up just 4 percent of the total number of mailings sent to potential cardholders.
Interest-free offers also disappear
Some issuers are also cutting back on promotional offers. According to Credit Suisse, issuers mailed just 206 million offers advertising a 0 percent APR on purchases — down from 232 million offers in February 2014.
Issuers also sent fewer mailings containing a 0 percent balance transfer offer last month. In February 2014, for example, issuers sent 225 million offers advertising an interest-free balance transfer rate. In 2015, issuers sent 200 million 0 percent balance transfer offers.
Card issuers may send more promotional offers once the weather warms up and the economy improves. According to data released March 23 by the Federal Reserve Bank of Chicago, economic growth softened in February as consumers trimmed their spending.
See related: Fed signals step toward higher rates
|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: March 25, 2015|