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Barclays, Cap One moves send credit card interest rates higher

Summary

Credit card interest rates rose for the first time in six weeks after Barclays and Capital One adjusted card offers.

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Even with Christmas approaching, lenders didn’t seem to be feeling the holiday spirit this week.

CreditCards.com’s Weekly Rate Report
Avg. APRLast week 6 months ago
National average14.68%14.63%14.33%
Low interest11.91%11.91%12.04%
Cash back12.48%12.48%12.63%
Balance transfer12.82%12.73%12.88%
Business12.91%12.91%12.96%
Student13.31%13.96%13.96%
Airline14.24%14.24%14.46%
Reward14.34%14.29%14.55%
Instant approval15.99%15.99%15.99%
Bad credit24.95%24.64%20.32%
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.)
Source: CreditCards.com
Updated: 12-21-2010

Credit card adjustments by Barclays and Capital One lifted the national average interest rate on new offers to 14.68 percent. That marked the first time in six weeks that annual percentage rates (APRs) have increased.

Barclays adjusted the APR range on its Carnival One World MasterCard from between 11.24 percent and 17.24 percent to between 13.99 percent and 24.99 percent. That means card applicants can expect a higher borrowing cost, regardless of their credit scores.

Other banks also tweaked their offers. Capital One discontinued its Secured MasterCard for Young Adults card, which CreditCards.com replaced in its database with the more broadly marketed Capital One Secured MasterCard. That card had an APR of 22.99 percent compared with the young adult secured card’s 19.80 percent APR. That change helped send the national average higher.

Overall, rates have come down from recently established record highs. (CreditCards.com’s national average hit a record high of 14.78 percent in November.) That may not be enough to increase credit card use, however. Some analysts say that credit card spending, dampened by increased rates and limited lending following the recession, may not bounce back.

“Consumer use of credit cards for online payments has sharply declined as issuers have tightened credit,” James Van Dyke, founder and president of Javelin Strategy and Research, said in a company press release. Tighter credit typically involves higher rates, lower lines of credit and tougher approval standards. Javelin reported that although credit cards remain the most common method of Internet payment, credit card purchases fell from 44 percent of online total payments volume (TPV) in 2009 to 40 percent in 2010. Meanwhile, credit card transaction velocity — the average number of times that a card is used monthly for online purchases — fell sharply.

Other analysts say that even as borrowers find credit cards easier to use, they aren’t deciding to charge more purchases on plastic. “Consumers are doing little borrowing, although lenders are easing standards modestly, especially for credit cards,” Moody’s reported in its credit card statement on Dec. 16.

See related: Credit card reform arrives in the form of the Credit CARD ActBanks loosen credit card lending standards, Fed report says, Calculator: How long will it take to pay off your credit card balance?, Credit card rates: interactive graphic on APR changes

What’s up next?

In Research and Statistics

Consumer groups: Discover credit card offers misleading

The test offers Discover made skirt the edges of federal regulations requiring complete disclosure of terms, say consumer advocates

Published: December 21, 2010

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Credit Card Rate Report Updated: October 16th, 2019
Business
15.18%
Airline
17.11%
Cash Back
17.25%
Reward
17.13%
Student
17.29%

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