Credit card interest rates rise to 15.02 percent, says survey
|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: July 2, 2014|
Interest rates on new card offers rose this week for the first time in two months, according to the CreditCards.com Weekly Credit Card Rate Report.
The national average annual percentage rate (APR) climbed to 15.02 percent Wednesday, after remaining at 15.01 percent for eight consecutive weeks.
Chase caused this week's rate change by adjusting the APR on the Southwest Airlines Rapid Rewards Plus card. Applicants for the card aimed at frequent fliers are now offered an APR of 15.99 percent. Previously, they were offered 15.24 percent.
This is the third time in three months Chase has increased the APR on a card tracked by CreditCards.com. In May, Chase increased the APR on the Marriott Rewards Visa Signature card from 15.24 percent to 15.99 percent. In April, it hiked the APR on the Disney Rewards Visa card from 14.24 percent to 15.24 percent.
Cards easier to get for some
These days, most credit card issuers are making few if any changes to credit card terms, such as APRs and annual fees. But new research from the American Bankers Association shows credit card issuers are at least making it slightly easier for some cardholders to qualify for a credit limit increase or a new card.
For example, the total amount of credit currently available to new and current cardholders expanded by 4.6 percent in 2013. According to the American Bankers Association, that's the first time since the Great Recession formally ended in June 2009 the total amount of credit available has increased.
Analysts at the American Bankers Association say that could be partially due to an increase in demand amongst cardholders with the best scores. The total number of cards belonging to consumers with excellent credit, for example, is on the rise, say analysts.
Meanwhile, the average credit line for new and current cardholders is continuing to shrink -- particularly for cardholders with lower scores. However, credit lines are narrowing at a much slower pace than they used to -- indicating to analysts card issuers are being much more generous toward certain applicants.
"While credit availability has fallen off dramatically since the financial crisis, it's beginning to stabilize as the changing nature of the credit card market becomes more entrenched," said the American Bankers Association's Kenneth J. Clayton in a press release.
Many cardholders are much less risky than they used to be and are better about paying their bills on time -- making it less likely they'll stiff credit card issuers with unpaid debt. In addition, card issuers' emphasis on attracting and approving consumers with the best credit -- and being stricter toward people with lower scores -- has made credit card lending much less risky overall and has made it easier for card issuers to approve a larger number of cards for select applicants.
That said, card issuers are continuing to make it tougher than it used to be for cardholders with damaged credit to get approved for more credit than they already have. While the total amount of credit available to cardholders with excellent credit has increased substantially over the past year, it's become less available to cardholders with damaged scores. For the fifth year in a row, total credit lines shrunk for cardholders with less-than-perfect credit. The average amount of credit available to each cardholder also fell.
Cardholders are continuing to pay off balances
Cardholders are using their cards more often, according to multiple reports. But, in many cases, they're paying off their balances in full each month rather than letting their debt sit and accumulate interest.
According to the American Bankers Association, the number of people who pay off their credit cards each month rose to an all-time high in the fourth quarter of 2013.
In part, the rise in "transactors" who pay off their credit cards every month is due to the fact that there are fewer cardholders nowadays with riskier credit profiles, said the American Bankers Association Kenneth J. Clayton in the release. The recession shook many high-risk cardholders out of the credit card market: They either lost their cards to default or had them taken away by tightened lending standards. Today's remaining cardholders are less likely to rack up more debt than they can quickly pay off.
It's also due to a widespread shift in preferences. Many people nowadays simply prefer to take on less debt and avoid paying interest. "Many of today's cardholders use their credit cards as a payment tool rather than a form of debt," said Clayton in the release. In addition, "changing card demographics in the wake of the financial crisis and the CARD Act's limits on managing risk have forced a movement away from riskier borrowers, creating the transactors versus revolvers dynamic that we're seeing."
- Rate survey: Average card rate climbs to record high of 16.96 percent – July 18, 2018: The average credit card interest rate settled at a record high Wednesday after another major issuer increased rates in response to the Federal Reserve’s June 2018 rate change ...
- Rate survey: Average card rate jumps to 16.93 percent – July 11, 2018: The average credit card interest rate inched higher this week after several cards adjusted APRs ...
- Rate survey: Average card rate climbs to all-time high of 16.92 percent – July 5, 2018: The average credit card interest rate set another record this week, climbing to 16.92 percent ...