May 20, 2015: Average rates on new credit card offers rose Wednesday to their highest point in more than six months, according to the CreditCards.com Weekly Credit Card Rate Report.
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The national average annual percentage rate (APR) jumped to 14.99 percent after Synchrony Bank increased the APR on the BP Visa credit card to 26.99 percent. Previously, J.P. Morgan Chase issued the BP Visa card and charged new cardholders a minimum APR of 20.24 percent.
Synchrony Bank announced in January that it would replace J.P. Morgan Chase as the issuer of the BP Visa, but it didn’t begin accepting applications for the card until May.
Meanwhile, Wells Fargo sweetened the offer on the Cash Back College card by lowering the card’s promotional APR from 5.9 percent to 0 percent. Students are given up to a year to take advantage of the new 0 percent rate.
Card delinquencies pick up
A growing number of credit card holders are lapsing on their bill payments, according to research released May 19 by the credit rating agencies Experian and Standard and Poor’s. The 30-day default rate for bank-issued credit cards rose in April to 3.18 percent of all accounts — a nearly two-year high. The last time the default rate rose above 3.17 percent was in July 2013. A year ago, the default rate for bank-issued cards settled at 2.84 percent.
Late payments on bank-issued cards are still rare compared to previous years when consumers fell behind on their payments more often. However, the recent uptick in delinquencies — late payments by 30 days or more — also suggests that at least some consumers are feeling more relaxed about their bill payments and letting their credit card payments slide.
According to Standard and Poor’s managing director David M. Blitzer., the uptick in delinquencies could also mean that consumers are feeling more bullish about their finances — particularly since the economy has improved significantly in recent months. Consumers often pay closer attention to their credit scores and to their bill payments when they’re feeling anxious about the economy and about their own financial health.
“Continued improvements in the economy and the labor markets seen in the April unemployment rate and job growth suggest consumers have reasons to be optimistic,” said Blitzer in a news release. “Apparently, that optimism has a darker side in rising defaults among bank card users.”
The increase in delinquencies may also be due to looser credit standards for new applicants. As the economy slowly improves, banks are making it slightly easier for consumers with a history of late payments to qualify for a new card. Some banks are also granting more credit limit increases to existing customers, according to a February 2015 report from the New York Federal Reserve — making it more likely that cardholders will charge more than they can afford to quickly repay.
Consumers may become more cautious about their bill payments in future months as they become more pessimistic about the economy. According to preliminary results from the University of Michigan’s Surveys of Consumers, consumer sentiment fell sharply in May as consumers became significantly more anxious about the economy’s slow growth.
“Confidence fell in early May as consumers became increasingly convinced that there would be no quick and robust rebound following the dismal first quarter (even if the underperformance was exaggerated by inadequate seasonal adjustments),” said the University of Michigan’s Richard Curtin in a statement. “The decline was widespread among all age and income subgroups as well as across all regions of the country.”
Despite increased pessimism about the economy, consumers are still feeling relatively optimistic about their personal finances, said Curtin, so retailers may see stronger spending in the summer months after a disappointing spring.
|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: May 20, 2015|