April 22, 2015: Average rate on new card offers increased this week to the highest point this year, according to the CreditCards.com Weekly Credit Card Rate Report.
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The national average annual percentage rate (APR) rose to 14.92 percent Wednesday after remaining at 14.9 percent for about a month. The last time average rates rose above 14.91 percent was in December 2014.
Capital One spurred this week’s rate change by increasing the APR on the Capital One Secured MasterCard by 2 percentage points. Applicants are now offered a single APR of 24.9 percent. The rate hike caused the average APR for subprime cards to increase to 22.73 percent.
The issuer also eliminated the Capital One Secured MasterCard’s $29 annual fee. Now, applicants who are trying to rebuild their credit only need to put down a security deposit of $49, $99 or $200 to qualify for a new card.
Annual fees disappear
Capital One isn’t the first card issuer to eliminate an annual fee this year. The number of cards advertising an annual fee has decreased in recent months, according to data released April 21 by the financial services firm Credit Suisse.
According to Credit Suisse, just 13 percent of card offers mailed to consumers’ homes now advertise an annual fee — down from 17 percent of offers mailed last year.
Premium cards that charge an annual fee in exchange for exclusive perks have also become somewhat less expensive. Since March 2014, for example, the average annual fee has fallen from around $101 per year to $90 per year.
Despite offering lower annual fees to potential cardholders, card issuers are becoming stingier with their interest-free promotions. According to Credit Suisse, issuers mailed approximately 220 million card offers advertising a 0 percent balance transfer offer last month — 4 million fewer than they mailed the year before.
The average amount of time cardholders are given to take advantage of an interest-free balance transfer has also decreased. For example, in March 2015, the average 0 percent balance transfer period extended for approximately 13.9 months. During the same time last year, cardholders were given, on average, 14.2 months interest-free.
Interest-free purchase offers have also become less common. According to Credit Suisse, issuers mailed 8 million fewer offers containing a 0 percent APR on purchases last month than they did the previous year.
Credit card mail volume picks up
The total number of card offers issuers mail to prospective cardholders has also decreased, according to CreditSuisse. For example, card issuers mailed just 297 million offers in March — 5 percent less than they mailed the year before.
However, issuers are ramping up their offerings, said CreditSuisse, and are on track to mail significantly more offers as the year goes on. For example, CreditSuisse expects issuers to mail 4.2 billion offers by the end of 2015 — 5 percent more than 2014.
Already, credit card mail volume has picked up somewhat since the beginning of the year. For example, card issuers mailed approximately 5 percent more offers in March than they did in February, thanks in part to a sharp uptick in marketing from American Express.
American Express recently lost a number of co-branded credit card partnerships, including a partnership with the popular wholesale retailer Costco. As a result, the company is expected to go after new cardholders much more aggressively as the year goes on.
In an April 16 earnings release, American Express CEO Kenneth I. Chenault highlighted some of the company’s most recent promotional efforts, including an unusual rewards programs called Plenti that allows cardholders to earn rewards using any kind of payment method, including cash and debit. “We also moved forward on initiatives that are gaining broader card acceptance among smaller merchants and aimed at capturing a greater share of U.S. consumers’ everyday spending,” said Chenault in a news release.
Like other major card issuers, American Express also reported on April 16 that cardholders increased their total spending significantly in the first quarter of 2015. For example, American Express card member spending rose 7 percent, year-over-year, last quarter.
Discover, Citi, Wells Fargo, Bank of America and Chase also reported increased cards spending activity last quarter. In an April 21 earnings release, Discover reported that cardholder spending inched up 2.7 percent in the first quarter of 2015. Meanwhile, Citi reported a 1 percent increase in consumer spending.
However, despite swiping their cards more often, cardholders are still careful about the total amount of debt they carry. For example, Citi reported April 16 that average credit card loans shrunk 4 percent, year-over-year, last quarter. Bank of America cardholders also trimmed their debt loads more aggressively last quarter, according to an April 15 report.
|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: April 22, 2015|