Credit card interest rates see 2nd straight increase
Discover tweaks More card APR, sending national average slightly higher
For the second straight week, it got more expensive to get a new credit card, though only slightly.
|CreditCards.com's Weekly Rate Report|
|Avg. APR||Last week||6 months ago|
|Methodology: The national average credit card APR is comprised of about 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.)|
Spurred by an APR change from Discover, the national average annual percentage rate (APR) on new credit card offers climbed to 14.35 percent, according to the CreditCards.com Weekly Credit Card Rate Report. That's up just a tick from the previous week, after a large jump the week before.
Discover raised the lower end of the APR range on its More card from 11.99 to 12.99 percent, but left the top end unchanged at 19.99 percent. That was the only APR change witnessed this week, but it was enough to push the national average slightly higher. The back-to-back increases were the first since late June.
Discover declined to comment about the move. However, it's common for issuers to tweak their terms and conditions -- APRs, annual fees, introductory rates, etc. -- from time to time for any number of reasons.
Though rate hikes haven't been as common in recent weeks, the overall trend for credit card interest rates is still upward for the year. 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 $6,417 to pay off the debt. That's $183 more than would have been required on Jan. 1, 2010, when the national average APR was 12.97 percent. (Calculator: How long will it take to pay off your credit card balance?)
Those numbers aren't welcome to American consumers, especially as unemployment remains high and seems likely to remain so. Data released Monday by private payroll management company ADP showed that private-sector jobs decreased by nearly 40,000 nationwide in September. That and other sour economic data has prompted calls for the Federal Reserve to boost the struggling economy through, for example, increased purchases of Treasury bonds.
Fed officials are apparently listening.
"Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long," said William C. Dudley, president of the New York Fed, in a speech on Oct. 1.
That outlook means that if credit card rates increase, it won't be the Fed to blame. Most credit cards in the United States carry variable rates that move up and down with the prime rate, which the Fed indirectly controls. If the Fed sees the economy as still shaky, it won't put the brakes on it by raising rates.
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