Rate survey: Average card rates fall to 14.96 percent
Interest rates on new credit card offers tumbled Wednesday for the first time in almost nine months, according to the CreditCards.com Weekly Credit Card Rate Report.
The national average annual percentage rate (APR) fell to 14.96 percent after remaining at 15.01 percent for about a month. This is the first time since June that average rates have dipped below 15 percent.
SunTrust Bank spurred this week's rate change by revamping its credit card lineup. It removed three of its old credit cards, including two rewards cards, and replaced them with updated versions that offer substantially lower rates. For example, it replaced the Travel, Dining and Entertainment card, included in the CreditCards.com database, with the new lower rate Travel Rewards credit card. SunTrust's newest travel card offers a starting APR of 10.24 percent and charges an $89 annual fee. The Travel, Dining and Entertainment card previously offered a starting APR of 14.99 percent.
Consumer credit card usage continues to increase
Consumers are continuing to rely more heavily on credit, according to fresh research from the Federal Reserve, and are increasingly snubbing their debit cards.
According to the Federal Reserve's latest G.19 report on consumer credit, revolving credit, which is mostly made up of credit card debt, expanded by 8.7 percent in September after increasing by 5.3 percent the previous month.
After years of halting growth, credit card balances are now at their highest point in six years.
However, many consumers are paying down their credit card balances at a relatively fast clip. For example, research released last month by the credit rating agency Fitch found that the credit card payment rate, which measures the rate at which consumers trim their balances, increased significantly since last year. Typically, a higher payment rate indicates that consumers are being more aggressive toward their debt.
But the accompanying growth in credit card balances captured by the Federal Reserve also shows that consumers are charging larger amounts to their cards. According to the Federal Reserve, card balances have increased every month since March, indicating that consumers' recession-era wariness of high interest credit has abated significantly in recent months.
Consumers are also choosing to use their credit cards instead of their debit cards more often, including for everyday purchases. According to First Annapolis Consulting's Ryan Feeley, consumers' increased preference for credit cards represents a significant shift in payment habits. "Debit growth had exceeded credit growth every year from 1993 to 2011, often by a substantial margin," wrote Neeley in an October 2015 First Annapolis newsletter. But since 2012, the opposite has occurred. Consumers have increasingly turned to credit.
According to Neeley, consumers' recent preference for credit may be partially due to increased concerns about card security as well as changes in debit card offerings.
For example, the highly publicized data breaches that occurred at major retailers such as Target, may have scared some consumers into using credit cards more often since many credit card fraud protections are stronger.
Debit cards have also become less enticing to use in recent years because they offer few, if any, rewards, says Neeley.
In addition, the growth in online shopping may have also prompted some consumers to use credit cards more often, also because of the increased protections over debit cards, he says.
However, Neeley expects that the recent shift toward credit may be short-lived. "Underlying demographic trends still favor debit growth over the long-term, as younger consumers are relatively more likely to use debit," wrote Neeley. "Thus, once credit catches up to a more normalized long-term growth trend, debit growth will likely regain its historical growth advantage and slightly outpace credit growth."
|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: Nov. 11, 2015|
See related: What will an interest rate hike cost?
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Rate survey: Average card APR jumps to all-time high of 16.35 percent – Jan. 17, 2018: Average credit card interest rates set a new record this week, according to the CreditCards.com Weekly Credit Card Rate Report ...
- Rate survey: Average card APR remains at record high of 16.32 percent – Jan. 10, 2018: The average credit card APR held steady at 16.32 percent this week, according to the CreditCards.com Weekly Credit Card Rate Report. ...
- Rate survey: Average card APR climbs to record high of 16.32 percent – Jan. 3, 2018: The average credit card APR shot up again this week after multiple lenders hiked rates, according to the CreditCards.com Weekly Credit Card Rate Report ...