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Cap One’s moves push credit card interest rates higher

Summary

Interest rates on new credit card offers surged higher this week, according to the CreditCards.com Weekly Credit Card Rate Report, following card adjustments by Capital One.

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Interest rates on new credit card offers surged higher this week, according to the CreditCards.com Weekly Credit Card Rate Report, following card adjustments by Capital One.

CreditCards.com’s Weekly Rate Report
Avg. APRLast week 6 months ago
National average14.31%14.23%12.05%
Low interest12.04%12.04%11.45%
Cash back12.63%12.63%12.24%
Balance transfer12.88%12.88%10.46%
Business12.96%12.96%9.18%
Student13.96%13.96%14.45%
Airline14.46%14.46%13.21%
Reward14.51%14.34%13.30%
Instant approval15.99%15.99%11.57%
Bad credit20.32%19.75%11.74%
Methodology: The national average credit card APR is comprised of 95 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: 6-9-2010

The national average annual percentage rates (APR) on new card offers leapt to 14.31 percent. It’s the second straight weekly increase, and as was the case last week, it’s driven by moves by Capital One. Meanwhile, recent changes by another bank are also likely to mean higher rates for most cardholders, though they didn’t impact our national average.

After boosting rates on three cards last week, Capital One introduced a higher APR version of its Orbitz Visa Platinum card aimed at borrowers with lower credit scores. The issuer also lowered rates on its Venture One Rewards Card, which is designed for borrowers with excellent credit.

What prompted those changes? “In general, details of our pricing strategy are proprietary, but we evaluate different pricing strategies periodically based on the competitive landscape and market conditions,” says Capital One spokeswoman Pam Girardo.

Capital One wasn’t the only issuer that made adjustments. Chase changed its United Mileage Plus Visa Signature card from a single 13.24 percent rate to a range of 13.24 to 19.24 percent, meaning most cardholders are likely to qualify for those costlier rates.

Those increased costs are nothing new, however. For example, a typical cardholder who borrowed $5,000 on a credit card today and consistently paid $150 per month at today’s average interest rate would have to pay $6,412 to pay off the debt. That’s $216 more than would have been required six months earlier.(Calculator: How long will it take to pay off your credit card balance?)

Subprime borrowers, however, are likely to face the greatest expense, as analysts say banks are charging more to cardholders with the lowest credit scores. “I expect the trend of rising rates and the design of creative new fees to apply to the riskier credit segments,” says Dennis Moroney, a research director in the bank cards division at TowerGroup.

See related: Credit card lending standards keep tightening, Fed report says, Credit card reform arrives in the form of the Credit CARD Act, Calculator: How long will it take to pay off your credit card balance?, Credit card rates: interactive graphic on APR changes

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Published: June 7, 2010

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Credit Card Rate Report Updated: August 14th, 2019
Business
15.55%
Airline
17.50%
Cash Back
17.63%
Reward
17.50%
Student
17.69%

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