Rate survey: Average card APR soars to record 16.13 percent

By  |  Published: August 2, 2017

Kelly Dilworth
Personal Finance Writer
Specializing in new trends in credit

 

 

The national average APR for new card offers climbed again this week, reaching an all-time high of 16.13 percent, according to the CreditCards.com Weekly Credit Card Rate Report.

For the 19th time this year, the national average APR broke a record for the highest national average APR CreditCards.com has recorded since it began tracking rates in mid-2007. Before this year, the highest average APR CreditCards.com had recorded was 15.29 percent – a difference of 0.84 percent.

Several card issuers increased rates this week. Pentagon Federal Credit Union, Navy Federal Credit Union and regional bank Fifth Third Bank increased rates on their cards by a quarter of a percent. Several gas cards and retail cards also increased rates by 0.25 percent. 

Most issuers have now increased rates by 0.25 percent in response to the Federal Reserve’s mid-June rate hike.

Most consumers able to absorb small rate increases
The Federal Reserve has increased its benchmark interest rate, the federal funds rate, four times since December 2015, causing credit card interest rates for most cardholders to increase by a full percentage point. But so far, the impact to consumers has been minimal..

While late card payments have picked up slightly, they are still rare by historical standards. Meanwhile, consumers are still applying for new cards at a relatively fast clip, according to the American Bankers Association.

The credit reporting agency TransUnion predicted in 2016 that consumers with substantial amounts of debt could have a tough time repaying their bills if their interest rates continued to increase. Yet a July 2017 analysis by TransUnion found that the Federal Reserve’s initial rate increases haven’t made a huge dent in consumers’ finances – largely because the rate increases have been relatively small. Since 2015, the Federal Reserve has increased interest rates only 0.25 percent each time.

After the Federal Reserve rate hike in December 2016, for example, “Most consumers appeared able to reallocate their available cash or make small changes to their spending habits,” TransUnion said in a July 2017 report.

TransUnion estimates that roughly 68 percent of consumers with variable rate loans are likely to feel the effects of a quarter-point rate increase. Other consumers pay their balances in full each month and aren’t affected by the Federal Reserve’s rate hikes.

Most consumers affected by the rate increases – roughly 82 percent – only have to pay up to $10 a month more when their rates increase by a quarter of a percent.  On average, consumers’ balances rose by just $6.45 a month, TransUnion said.

Meanwhile, just 1 percent of consumers are likely to owe an extra $50 a month or more after the Federal Reserve increased rates by 0.25 percent.

Cardholders with the lowest credit scores likely to struggle the most
Not surprisingly, cardholders with the largest balances are among the likeliest to struggle with ongoing rate increases. So, too, are cardholders with the highest starting rates. According to TransUnion, more than 9 million consumers are at risk of falling behind on payments if their APRs increase by another quarter-percent.

Most cardholders who are likely to fall behind on their payments if their card APRs increase are cardholders who have already struggled in the past with paying their bills. TransUnion estimates that roughly half of consumers with bad credit are going to have a tough time absorbing additional rate increases. Meanwhile, up to 5 percent of borrowers with good, but not great, credit may also fall behind. In addition, roughly 1 to 2 percent of borrowers with the highest credit scores could have a hard time absorbing another quarter-point rate increase.

The Federal Reserve is expected to increase rates again – possibly as soon as December 2017. If the Federal Reserve increases rates several more times over the next year, as the Fed is expected to do, an even larger number of cardholders could have a tough time paying their bills.

TransUnion estimates that the number of cardholders struggling to absorb rate increases would climb to 2.5 million consumers if the Federal Reserve increases rates by 1 percent.

CreditCards.com's Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 16.13% 16.11%
15.44%
Low interest 12.87%
12.84% 12.24%
Cash back 16.36%
16.34%
15.60%
Balance transfer 15.35%
15.34%
14.68%
Business 13.68%
13.68%
13.41%
Student 15.64%
15.64%
13.67%
Airline 16.06%
16.06%
15.40%
Reward  16.21%
16.20%
15.50%
Instant approval 18.57%
18.55%
18.07%
Bad credit 23.46%
23.46%
23.01%
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.)
Source: CreditCards.com
Updated: Aug. 2, 2017

See related: 5 ways to cut your card debt as interest rates riseRejection of credit card applications rises, NY Fed survey shows, Fed: Card balances jump $7.3 billion in May


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Updated: 10-23-2017

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