Credit card interest rates fall after Wells Fargo cuts APRs

In what it called a "competitive pricing" move, Wells Fargo drove down the average rate on new credit cards this week by lowering the rates on several cards.'s Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 14.45%
Business 12.20%
12.20% 10.49%
Low interest 12.24%
Cash back  12.53%
Balance transfer
Student 14.10%
Airline 14.43%
Instant approval 18.41%
Bad credit 20.84%
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.)
Updated: 3-17-2010

The national average interest rate on new credit card offers fell to 14.45 percent, according to the Weekly Credit Card Rate Report, after Wells Fargo lowered annual percentage rates (APRs) on four card offers. Many credit cardholders have seen their rates increase over recent months as banks looked for new sources of income amid a challenging lending environment. Wells Fargo's decision to lower APRs bucks that larger upward trend.

"As a normal course of business, Wells Fargo evaluates its pricing and fees to ensure the best competitive pricing for our customers while managing risk for the company," says Lisa Westermann, the bank's assistant vice president of public relations.

There's no guarantee that all applicants would ever see the lower rates, however. Three of the four cards are offered with a range of interest rates, not just one single APR for all applicants. This gives the issuer the freedom to offer a lower APR to someone with a good credit history, but a higher rate to a customer with thin or poor credit.

A different approach
Still, the downward movement is noteworthy. Other banks that have cited increased risk, as well as greater regulation from the Credit CARD Act, have taken the opposite tack -- opting to raise rates on new card offers. Those changes have been widely viewed as banks' pre-emptive strikes against the new law, which limits lenders' ability to raise interest rates on existing credit cards. Since a majority of the act's provisions were implemented in February, only a change in the prime rate or a serious borrowing mistake by the cardholder, such as being 60 days late with a payment, can trigger a change to an existing card's APR without the issuer first providing 45 days' notice.

Cardholders have paid for bank issuers' response to the CARD Act. For example, someone 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 $6,431 to pay off the debt. That's $284 more than would have been required six months earlier. (Calculator: How long will it take to pay off your credit card balance?)

More positive news for cardholders
The falling national average is the second bit of good news for cardholders in as many days. On Tuesday, the Federal Open Market Committee -- the Fed's monetary policymaking arm -- voted to keep the federal funds rate at a range of 0 percent to 0.25 percent and the prime rate at 3.25 percent. For the time being, rates are likely to remain low, with the FOMC saying it's likely to maintain "exceptionally low levels of the federal funds rate for an extended period." 

Over recent months, many lenders switched their cards from fixed rates to variable rates, which are tied to the prime rate. As long as the Fed keeps its rates at record lows, that ensures most cardholders won't see any unexpected rate hikes without at least 45 days' notice. 

See related: Credit card reform arrives in the form of the Credit CARD Act, A guide to the Credit CARD Act of 2009, What's NOT covered by the credit card reform law, Variable interest rate cards replacing fixed rates, Calculator: How long will it take to pay off your credit card balance?

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Updated: 03-25-2019