Credit card interest rates hold steady at 14.95%
By Kelly Dilworth | Published: August 21, 2013
|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. 21, 2013|
Average rates on new credit card offers remained at 14.95 percent Wednesday, according to the CreditCards.com Weekly Credit Card Rate Report.
Issuers left interest rates alone this week. However, not all credit card terms remained the same.
American Express, for example, lengthened the promotional APR period on three of its flagship credit cards: the Blue Cash Everyday card, the Blue Sky card and the Blue card. Applicants for all three cards may now qualify for a 0 percent APR on purchases for up to 15 months. The issuer also introduced a 15-month, 0 percent balance transfer offer to each card.
Barclays, meanwhile, canceled a test offer on the US Airways Premier World MasterCard. The issuer eliminated the card's 12-month introductory APR after introducing the promotional offer last week. In addition, Barclays extended the World MasterCard's 0 percent balance transfer period from 12 months to 15 months.
Consumer confidence flags
Credit card issuers have been testing new promotional offers more over the past several months in order to attract new cardholders.
However, despite better offers from some card issuers, consumers may not be in the spending mood, according to new research from the University of Michigan and Reuters.
A preliminary consumer confidence reading released Aug. 16 showed that consumer sentiment dropped in August to its lowest point since April, according to Reuters.
Consumers' drop in expectations surprised economists who predicted that consumers would be feeling much more optimistic as the summer neared to an end. According to Reuters, economists predicted that the University Michigan Thomson Reuters Consumer Sentiment Index would hit 85.5 in August. Instead, a preliminary reading shows it fell from 85.1 to 80.
Just last month, consumer confidence surged to a six-year high as a record number of consumers told researchers that they were were feeling increasingly optimistic about the economy's underlying strength.
That bullishness wavered in August, however, as a significantly larger number of consumers expressed skepticism about the current state of the economy and said that economic growth is likely to slow in the months ahead.
In a statement released to Reuters, Surveys of Consumers Chief Economist Richard Curtin said that rising interest rates on long-term loans, such as mortgages, is partially to blame for this newfound pessimism.
Several lenders have hiked long-term interest rates over the past few months, according to Reuters, in order to prepare for expected changes to the Federal Reserve's aggressive economic stimulus programs.
Since 2008, the Federal Reserve has enacted a number of rate-lowering policies, such as setting the federal funds rate target near zero, in order to encourage businesses and consumers to take out more loans.
The Fed insists it won't raise the federal funds rate target until the unemployment rate falls below 6.5 percent. However, as the economy slowly strengthens, many analysts expect that the Fed will soon begin walking back several other expansionary policies, such as the Fed's aggressive bond buying program.
That expectation has prompted prospective borrowers to seriously consider buying a new home or car before interest rates go up, according to a survey released in July by Reuters and the University of Michigan.
Back-to-school shoppers hit malls
Despite feeling increasingly pessimistic about the economy, consumers are still visiting nearby retailers this summer for back-to-school supplies, according to the National Retail Foundation, which tracks back-to-school sales. However, they're being careful about what they buy -- and what payment method they use to purchase new items.
According to a survey released Aug. 20, a significantly larger number of shoppers had already completed at least half of their back-to-school shopping this summer as they try to spread out their purchases and compare prices. "Shopping early and often has become a sign of the times as budget-conscious consumers aim to ease the brunt of large spending events," said NRF President and CEO Matthew Shay in a statement.
In addition, more consumers are using sales and promotions to help them shop this summer, and many are planning to use cash, rather than credit, to finance their purchases.
According to the survey, the majority of respondents told researchers that they plan to use a debit card or cash to pay for their remaining back-to-school expenses. Fewer than 20 percent say they plan to use a credit card.
- Chart: Historic credit card interest rates – See key rates data from our weekly survey of card APRs 2010-2017 ...
- Poll: Americans spend more than $100 billion on sports – Gyms, equipment and lots of sporting events can wallop the wallet ...
- Fed: Card balances jumped by $2.6 billion in July – Credit card balances barreled toward an all-time record in July, according to the Federal Reserve ...