Rate survey: Average card APR holds steady at 15.19 percent

Interest rates on new credit card offers remained unchanged this week, according to the CreditCards.com Weekly Credit Card Rate Report. For the fifth week in a row, the national average annual percentage rate (APR) stayed put at 15.19 percent.

None of the cards tracked by CreditCards.com advertised new interest rates. Promotional rates, such as 0 percent balance transfer offers, also remained unchanged.

Interest rates on new credit card offers are currently at their highest point in more than four years. The last time rates rose above 15.19 percent was in December 2011 when the national average briefly peaked at 15.22 percent.

At that time, rates only stayed above 15.19 percent for two weeks before falling below 15 percent the following month. This week marks the longest period of time rates have stayed above 15.16 percent since CreditCards.com began tracking rates in mid-2007.

Interest rates increased on variable rate cards earlier this year after the Federal Reserve raised its benchmark interest rate by a quarter of a percent. Almost all the 100 cards tracked by CreditCards.com quickly followed suit and increased rates by the same amount.

Higher APRs on new card offers are also driven, in part, by the large percentage of cards that include a rewards program.

This week marks the longest period of time rates have stayed above 15.16 percent since CreditCards.com began tracking rates in mid-2007.

Most credit cards these days advertise some type of rewards. Among the 100 cards in the CreditCards.com database, for example, 78 advertise a a rewards program.   

More cardholders carry balances on their rewards cards
Rewards cards also tend to have significantly higher interest rates. Since May 2010, for example, the average rewards card APR increased from around 14.33 percent to 15.30 percent.

As a result, experts frequently recommend that cardholders use rewards cards as payment tools, rather than as loans, and pay off their balances each month to avoid paying interest.

Despite progressively higher rates on rewards card offers, a growing number of consumers are carrying balances on those cards, according to new data from market research firm Phoenix Marketing International.

The marketing firm polled more than 3,000 credit and charge card holders and found that the vast majority of cardholders – 87 percent – owned at least one card that included a rewards program. Even cardholders with low incomes carried a rewards card.

For example, 73 percent of cardholders with incomes of less than $20,000 a year carried a rewards card. Eight-two percent with incomes between $20,000 and $50,000 also owned a rewards card. At the wealthy end of the scale, more than 90 percent of cardholders with higher incomes enjoyed rewards on their cards.   

Among those cardholders carrying a card with a rewards program, 56 percent admitted to a carrying a balance on their card, up from 49 percent in 2013.

"Rewards credit cards are deeply woven into the fabric of today's credit card market, with people from nearly every segment of American society using them," said Phoenix International’s Greg Weed in a May 16 news release. "These cards contribute the lion's share of credit card market spending, transactions and revolving balances."

Missed card payments tick up
As cardholders rack up charges on their rewards cards and pack on more debt, a growing number of cardholders are falling behind on payments.

According to new research released May 17 by the credit rating agencies Experian and S&P, the default rate on bank-issued credit cards jumped to 3.09 percent in April – up from 2.92 percent in March.

Late payments on credit cards are still rare by historical standards. However, the percentage of cardholders falling behind on their card payments has increased significantly over the past two months, said Experian. Meanwhile, late payments on other types of loans have declined.

“For two months, the overall consumer credit default rate has dropped to new lows while the default rate on bank cards has climbed,” said S&P’s David M. Blitzer in a news release. “Since the financial crisis, consumers are paying more attention to their debts, particularly longer term financial commitments such as homes and auto.” But payments on credit cards have been more volatile, he said.

“The longer term post-crisis decline in the bank card default rate leveled off in 2014,” said Blitzer. “Since then, it has been in a range of 2.5 to 3.2 percent. Bank card, auto, and mortgage default rates are all lower than their pre-financial crisis levels. However, the bank card rate is more volatile than the others and more sensitive to consumer spending trends. Whether the default pattern for bank cards stabilizes remains to be seen.”

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 15.19% 15.19%
Low interest 11.96%
11.96% 11.62%
Cash back 15.30%
Balance transfer 14.39%
Business 13.12%
Student 13.42%
Airline 15.17%
Reward  15.30%
Instant approval 18.04%
Bad credit 22.56%
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: May 18, 2016

See related: Privacy or rewards? Some card companies force you to choose

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Updated: 03-21-2019