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Interest rates mostly steady as credit card reform nears

Summary

Interest rates on new credit card offers were little changed this week, according to the CreditCards.com Weekly Credit Card Rate Report, as the countdown continued toward implementation of major credit card industry reforms.

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Interest rates on new credit card offers were little changed this week, according to the CreditCards.com Weekly Credit Card Rate Report, as the countdown continued toward implementation of major credit card industry reforms.

CreditCards.com’s Weekly Rate Report
Avg. APRLast week 6 months ago
National average14.15%14.12%12.06%
Business11.32%11.31%11.41%
Low interest12.17%12.17%10.53%
Cash back12.56%12.56%11.63%
Balance transfer12.71%12.62%10.41%
Reward13.77%13.77%12.10%
Airline14.17%14.17%13.48%
Student14.47%14.47%14.45%
Instant approval18.41%18.41%12.99%
Bad credit24.86%24.86%14.29%
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: 2-10-2010

The national average credit card annual percentage rate (APR) rose slightly to 14.15 percent, the highest level since tracking began in 2007. APRs have been rising for months as banks prepared for the approaching Credit CARD Act. That law’s major provisions — set to take effect on Feb. 22 — will restrict banks’ ability to raise rates on existing card balances.

As a result of recent rate increases, cardholders are paying more to borrow on new plastic. 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 $6,390 to pay off the debt. That’s $270 more than would have been required six months earlier.

Other data has also highlighted the increased cost of borrowing. Synovate’s latest Mail Monitor indicates that during the fourth quarter of 2009 the average purchase APR hit the highest recorded point over the past five years. “We know that ahead of the CARD Act, issuers went ahead and raised APRs on cards,” says Anuj Shahani, director of competitive tracking services for Synovate’s financial services group.

But it’s not just APRs that have increased. According to Synovate, credit card offers increased by 46 percent in the fourth quarter of 2009.That combination of more — and more expensive — credit will likely continue.

“As the economy recovers, even at a modest pace, we expect credit to become available to consumers, albeit at a higher price,” said Shahani said in a Synovate press release. “The CARD Act has clamped down on many revenue streams for issuers and some of this lost revenue is going to be made up by increasing annual fees or introducing new fees on credit cards.”

See related: Banks continue to tighten credit card lending standards, Fed report says, A guide to the Credit CARD Act of 2009

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Published: February 10, 2010

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Credit Card Rate Report Updated: August 21st, 2019
Business
15.55%
Airline
17.49%
Cash Back
17.63%
Reward
17.49%
Student
17.69%

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