Interest rates on credit card offers held steady at 14.96 percent for a seventh week, according to the CreditCards.com Weekly Credit Card Rate Report.
Our final rates survey of 2012 was typical of the entire year, with not much activity. Only one of the 100 cards tracked in the average modified its rates this week. JetBlue from American Express adjusted its introductory rate on balance transfers to 3.99 percent, from 3.90 percent. The card also lengthened the period for the introductory rate to nine months, from six months. After the introductory period, the rate rises to the card’s standard rate for purchases, which was unchanged at 15.24 percent for applicants with excellent credit.
|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: Dec. 26, 2012|
The change did not affect card averages, as CreditCards.com’s calculation does not include introductory rates.
No card issuers changed rates that apply to purchases, leaving the average on pace to close out 2012 in the holding pattern it has maintained for much of the year. At the start of the year, the average rate stood at 15.14 percent, a level it did not reached again. Rates bobbed around in a narrow range all year, ending with the average rate at 14.96 percent — coincidentally the same rate as for all of 2012. That’s slightly ahead of the 2011 average of 14.85 percent.
Consumers lighten debt load
Stability on the rate front comes as consumers — still in penny-pinching mode — hack their debt to even-more-frugal levels. According to the Federal Reserve, debt payments on average were 10.61 percent of disposable personal income, or after-tax income, in the third quarter for 2012. That was lower than any period since the third quarter of 1983. The measure of the debt burden looks at payments on mortgages and consumer debt, including credit cards.
When looking at total financial obligations, which adds in payments for property taxes, auto leases, and property rents for tenants, payments were 15.74 percent of disposable income, the lowest since the first quarter of 1982, the Federal Reserve data showed.
For homeowners, payments on consumer debt alone consumed 4.99 percent of income in the third quarter. That’s a relatively low level by historical standards, but it was up slightly from levels achieved earlier in the year.
Do today’s cost-conscious household balance sheets mean consumers are poised to loosen their purse strings where card use is concerned? Some economists are not betting on it.
The expansion of consumer debt that the Fed tracked last quarter probably reflects increases in auto loans, not credit card balances, as a surge of car buying helped lift the auto sector, said Gregory Daco, senior principal economist at IHS Global Insight.
“In terms of revolving credit, banks are still very careful about who they lend to,” he said. That cautiousness in unsecured card lending has persisted since the recession of 2008-09, despite the gradually improving economy.
Much has been said about the reasons for consumers’ reluctant borrowing habits. Because of the recession and subsequent lean economic times, many debts have been erased by foreclosure and bankruptcy, although those trends are improving. Voluntary household belt-tightening can account for only a portion of the slimmed-down debt burden.
Card issuers may be gearing up offers as competition for business increases, some analysts say. Credit Suisse is projecting a pickup in offer mailings, a barometer of overall marketing activity by card issuers.
“We believe that 2013 will see moderately increasing competition for revolving balances, ” Credit Suisse analyst Moshe Orenbuch wrote in a recent research note. He projects a 10 percent increase in card offers.
The expected uptick, if it proves out, will come against the backdrop of a slow year for offer activity. Overall offer volume by mail will be down 10 percent from 2011, Orenbuch estimates, with a 45 percent plunge coming late in the year during November.
“We believe that the operating environment faced by credit card issuers remains very competitive,” he wrote, “particularly at the higher spending end of the spectrum.”