Chase move sends credit card interest rates higher
By Kelly Dilworth | Published: February 2, 2011
|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.)|
Interest rates on new credit card offers, already in near-record heights, continued their slow, steady climb this week, according to the CreditCards.com Weekly Rate Report.
Spurred by a rate increase from Chase, the average annual percentage rate (APR) on new credit card offers rose to 14.73 percent on Wednesday. It's the eighth consecutive week that interest rates rose or stayed flat -- the third longest run since CreditCards.com began tracking rates in mid-2007.
Chase, Citi adjust
Chase raised the bottom end of the APR range on the Slate card from 11.24 percent to 11.99 percent, prompting the national average to rise. The bank also lowered the card's top end from 22.24 percent to 21.99 percent. Because CreditCards.com uses only a card's lowest rate in its calculations, the Slate card's reduced APR at its high end -- offered to consumers with less-than-stellar credit -- didn't affect the national average.
In response to a request for comment on this week's card changes, Chase spokeswoman Gail Hurdis says, "Our pricing reflects a multitude of factors that are relevant to our business, and we adjust it from time to time as we think it's appropriate for consumers and the company."
Other banks made significant moves this week as well. Citi raised the top end of the APR ranges of the mtvU Platinum Select card and the Citi Forward card by a full percentage point each. Both cards now feature a range of 12.99 percent to 20.99 percent, up from 12.99 percent to 19.99 percent the previous week. Citi also extended from seven months to 12 months the period during which new cardholders can take advantage of the Citi Forward card's 0 percent APR on new purchases. Meanwhile, Discover increased the promotional 0 percent balance transfer period on its Discover Open Road card from 12 months to 18 months.
Credit loosened in the last quarter of 2010, but is still tight
This week's mixed findings on card offers were preceded by a new survey from the Federal Reserve that showed that credit cards are becoming easier to get, but they are not always consumer friendly.
On Jan. 31, the Fed released the quarterly Senior Loan Officer Opinion Survey, which said that a significant number of banks loosened credit in the fourth quarter of 2010, underscoring a trend that began earlier in the year. According to the survey, 12.5 percent of banks said that they made it easier for new cardholders to obtain credit in the last quarter of 2010, the same number reported in the third quarter of 2010. It's worth noting, however, that although five of the country's larger banks said that they relaxed credit standards on new card applications, none of the smaller banks had.
Meanwhile, a significant number of large banks reported that they tinkered with the terms and conditions on their card offers in the past three months, though the changes weren't always favorable to consumers. About 11 percent of banks reported that they loosened the terms and conditions on their card offers. An equal number said that they tightened them.
This finding is consistent with CreditCards.com data, which shows that many of the country's largest banks are making some parts of their credit card offers more attractive -- for example, by lengthening introductory periods on promotional APRs -- while a significant number are also making other parts of their card offers less attractive -- for example, by hiking interest rates and fees.
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