Aug. 19, 2015: Average credit card interest rates remained cemented in place Wednesday, according to the CreditCards.com Weekly Credit Card Rate Report
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None of the cards included in the weekly rate report advertised new interest rates. As a result, the national average annual percentage rate stayed at 15 percent for the ninth consecutive week. Promotional rates, such as interest-free balance transfer offers, also remained unchanged.
Changes to card offers are rare these days, thanks in part to a 6-year-old law that limits issuers’ ability to re-price accounts once a card has already been issued. The Credit CARD Act of 2009 requires issuers to give cardholders at least 45 days’ advance notice before changing the interest rate on an existing account. Issuers have responded to the requirements by offering higher rates upfront and by trimming advertised rates less often.
Consumers continue to open more accounts
Despite higher rates on new card offers, consumers are showing renewed interest in opening new accounts, according to new research from the New York Federal Reserve.
According to the latest Household Debt and Credit Report, consumers opened more credit card accounts in the second quarter of 2015 than at any other time since 2009. Lenders also received significantly more credit inquiries for all types of credit, including credit cards.
In addition, consumers became increasingly willing to finance their purchases rather than pay for them in cash. According to the New York Fed, consumer card balances expanded by more than $34 billion between the spring of 2014 and the spring of 2015. As a result, consumers now owe approximately $703 billion to credit card lenders — up from $669 billion in the second quarter of 2014.
Despite owing substantially more on their cards, most consumers aren’t falling behind on their payments. Credit card delinquencies — late payments by 30 days or more — remain near record lows. Just 8.4 percent of all outstanding balances are more than 90 days overdue, said the New York Fed.
That has made it easier for lenders to issue larger amounts of credit. For the 10th quarter in a row, the total amount of credit issued to cardholders increased last quarter as lenders padded new customer’s credit limits and approved more credit limit increases.
Many cardholders aren’t taking advantage of the bigger limits, however, and are instead repaying their balances in full each month.
Bigger credit limits, but fewer interest payments
According to a new analysis from credit rating agency Fitch, the uptick in cardholders who pay off their balances in full has been a mixed blessing for card issuers since it’s made it tougher for them to expand their profits. As cardholders become less likely to stiff their lenders, they are also making it more difficult for card issuers to grow their profits since they’re collecting fewer interest payments.
“Better asset quality has come at a cost — fewer customers are revolving borrowers and more customers pay off balances each month,” said Fitch in an Aug. 18 news release. In addition, “These ‘transactors‘ tend to demand costly reward programs,” which have become such a common feature that most credit cards now offer some type of reward program.
The ease of comparing new card interest rates online could be especially costly for card issuers in future months when the Federal Reserve increases the federal funds rate and cardholders’ interest rates automatically increase as a result. “Successfully achieving good asset sensitivity (i.e., stronger net interest margins as rates rise), will be challenging as Internet-sourced deposits and easy rate comparability will be unlike anything previously available to cardholders during prior rate hikes,” said Fitch in the release.
|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: Aug. 19, 2015|