Credit card interest rates rose slightly this week — puncturing a multi-week lull in which all 30 credit card issuers that CreditCards.com tracks left interest rates alone.
|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.)|
The national average afnnual percentage rate (APR) on new credit card offers climbed to 14.74 percent on Wednesday, according to the CreditCards.com Weekly Credit Card Rate Report. The bump in the national average was small — just a hundredth of a percentage point — but it pushed the national average APR on new card offers to its highest level since Dec. 1.
It was the first movement in the national average in three weeks and only the second in the previous five.
This week’s increase was spurred by a small rate hike by Chase on the United Mileage Plus Visa Signature card. Chase increased the credit card’s APR by 1 percentage point from 13.74 percent to 14.74 percent — making the card’s APR exactly even with the national average. Chase didn’t respond to a request for comment. However, this is the third time this year that the bank has adjusted interest rates on some of its cards.
No other card issuers that CreditCards.com tracks made APR moves this week, continuing a trend of non-movement for most banks. Of the 30 card issuers that CreditCards.com tracks, only four, including Chase, have adjusted standard purchase APRs since the beginning of 2011.
Experts attribute this year’s stickiness in rates to a seasonal lull that occurs at the beginning of each year. As banks strategize for the new year, they tend to leave card offers alone until early March, experts say. As a result, the first two months of 2011 have been marked by multiple weeks of non-movement, as well as incremental rate increases that have barely made a dent in the national average. Since Jan. 4, the national average has increased four times — but never by more than a hundredth of a percentage point — held steady four times and decreased zero times.
Meanwhile, as banks re-evaluate their card offers, federal regulators and consumer groups observed an important anniversary on Tuesday. Exactly one year earlier, major provisions of the Credit CARD Act of 2009 took effect, leading to sweeping reforms in the industry. The anniversary prompted multiple reappraisals in recent weeks, with many observers giving the new law a mixed grade.
In a statement released on Tuesday, American Bankers Association vice president Kenneth J. Clayton offered faint praise for the new law, coupled with strong criticism. “It is clear the Act has ushered in a new era of empowerment for credit card customers,” said Clayton in the statement. “It is also clear, however, that these benefits have not come without trade-offs, including a reduction in available credit for many consumers and increased prices.”
Pamela Banks, a senior policy counsel for the consumer watchdog group Consumers Union, gave the law a mixed grade as well, but offered a much different perspective on how it could be improved. Banks praised the CARD Act for its extensive impact on consumers’ ability to make sense of their credit cards — then called on the new Consumer Financial Protection Bureau to enact even stronger reforms.
“The CARD Act has made a big difference by putting an end to some of the bait-and-switch tactics that unfairly trap credit card consumers in high interest debt,” said Banks in a statement. “But consumers still need to be on the lookout for unfair credit card practices. The Consumer Financial Protection Bureau should finish the job of protecting consumers from abuses by big banks and their credit card programs.”
The Consumer Financial Protection Bureau, in turn, marked the law’s anniversary on Tuesday by holding a conference about the Credit CARD Act’s performance. In opening remarks at the conference, White House adviser Elizabeth Warren applauded the credit card law’s dramatic impact on industry behavior. Warren praised some credit card issuers for going above and beyond the law’s requirements and criticized others for taking advantage of the law’s loopholes.
“A year later, the CARD Act has brought about major changes in the way the industry operates,” said Warren in the speech. “In part, this is attributable to the protections Congress enacted. But the data we have assembled indicate that much of the industry has gone further than the law requires … Leaders in the industry deserve credit for moving in the right direction. [But] not everyone has embraced this approach.”
The Consumer Financial Protection Bureau also released a study on Tuesday that found that the Credit CARD Act has been highly effective in reining in lenders. But there is still work to be done, says the agency.
The study found that, despite this year’s higher APR rates on new credit card offers, instances of repricing after a consumer has applied for a card have dropped dramatically, say researchers. “Prior to the CARD Act, approximately 15 percent of accounts were repriced over the course of a year,” wrote researchers in a summary of the report. “Today, that number is under 2 percent.”
See related:Study: Credit card’s more transparent since law took effect, , Consumer Financial Protection Bureau says CARD Act improved credit cards, An interactive guide to the Credit CARD Act of 2009