Interest rates on new credit card offers idled at 14.96 percent for the third straight week, according to the CreditCards.com Weekly Credit Card Rate Report.
|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. 28, 2012|
None of the cards CreditCards.com tracks featured rate changes this week. However, one issuer, Discover, appears to be testing a new student offer.
The Discover Student More card previously featured a promotional interest-free offer on purchases for nine months and didn’t advertise a balance transfer offer. However, some alternative offers viewed by CreditCards.com advertised a shorter interest-free period that lasted just six months. Others featured a promotional offer on purchases for nine months, but also included a promotional balance transfer APR of 10.99 percent for the same amount of time.
Issuers often test new offers in this way. For example, different computer users will see alternative offer terms for the same card and may even see different offer terms when they check back a day or two later. The different terms are often due to marketing initiatives in which issuers experiment with alternative offers.
It’s possible Discover may be gearing up for even more substantial changes to its student card, according to promotional materials viewed this week by CreditCards.com.
For example, some promotional materials on the issuer’s website advertise a lower standard APR of 10.99 percent on the Discover Student More card. However, the card’s terms and conditions available on the website still advertise a higher APR of 12.99 percent for students with the best credit. Because the card’s application is still showing the higher rate, CreditCards.com did not record the lower advertised rate in its database.
Credit card market still weak
In previous years, issuers frequently tested new credit card offers. However, through most of 2012, the majority of issuers have been slow to make substantial changes to their card offerings and have left many of their offer terms alone.
During the same period, issuers have also cut back substantially on the number of card offers they send to consumers’ mailboxes and have focused much of their attention on a narrow subsection of consumers who have excellent credit and a stronger ability to spend, according to the financial services firm Credit Suisse, citing Mintel Comperemedia research.
The long-term lull in card offer changes and credit card mailings has corresponded with an equally noteworthy lag this year in the number of consumers applying for new credit. For the third quarter in a row, fewer consumers applied for credit this summer, according to data released Nov. 27 by the New York Federal Reserve.
The number of open credit card accounts, meanwhile, dropped by 1 million customers in the third quarter of 2012, according to the Fed.
Experts say that consumers’ appetite for new credit is likely to remain weak as long as the fitful job market remains uncertain. Many consumers have worked hard to get out from under the mountains of debt they accumulated before the recession, say experts, and are less than eager to repeat the same mistakes, particularly when the job market is still troubled.
Consumer spending strengthens
That said, consumer spending has brightened considerably in recent months, while consumer confidence has soared. Barring a reversal in economic growth, experts predict that consumer spending will likely gradually gain steam through the rest of the holiday season.
Already, early figures indicate that retail spending during Black Friday weekend far surpassed last year’s totals, according to the National Retail Federation (NRF). About 247 million people are estimated to have hit the stores over the Thanksgiving weekend, according to an NRF survey released Sunday, up from 226 million in 2011.
That trend may not continue into the New Year, however, if middle-class tax rates rise as scheduled in 2013, say experts. A day after the National Retail Federation issued its early spending estimates, the White House issued a stern warning that the recent jump in spending will sharply reverse after the New Year if Congress fails to come to an agreement about the so-called fiscal cliff. The automatic expiration of Bush-era tax cuts that’s scheduled for Jan. 1 is expected to take a significant bite out of most people’s pocketbooks, giving them less room to spend on extras.
“Allowing the middle-class tax rates to rise and failing to patch the Alternative Minimum Tax (AMT) could cut growth of real consumer spending by 1.7 percentage points in 2013,” said the White House in a press release issued Monday. “This sharp rise in middle-class taxes and the resulting decline in consumption could slow the growth of real GDP by 1.4 percentage points, which is consistent with recently published estimates from the Congressional Budget Office.”