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Credit card rates hold steady


March 15, 2013

Current averages:

  • Average consumer credit card rate, overall market: 16.82 percent
  • Average consumer non-rewards credit card rate: 15.19 percent
  • Average consumer rewards credit card rate: 17.52 percent
  • Average student credit card rate: 17.42 percent
  • Average business non-rewards credit card rate: 14.74 percent
  • Average business rewards credit card rate: 15.51 percent

The U.S. bank prime rate was unchanged in the first half of March, at 3.25 percent. All the credit card offers tracked by this survey were also unchanged in early March, remaining stable for the first time in the last four surveys.

This lack of change in credit card rates may be symptomatic of the uncertainty created by the federal budget standoff. Sequestration, a series of budget cuts which earlier legislation mandated would take place automatically in the absence of a deficit-reduction compromise between Democrats and Republicans, went in effect on March 1. Although there have been accusations that certain segments of the government are over-dramatizing the impact of sequestration for political purposes, it is widely agreed that these budget cuts will be a drag on economic growth.

Also creating a drag on growth is the uncertainty created by ongoing wrangling between the two major parties. Whatever impact sequestration has may be magnified by the fact that questions first about the fiscal cliff and then sequestration have hung over the economy for the past few months. That environment could make consumers more reluctant to spend, and businesses more cautious about hiring plans.

Speaking of hiring, employment provided one of the rare bright spots for the economy in recent weeks. The Bureau of Labor Statistics announced that 236,000 new jobs were created in February, one of the better months in recent years. This is a good sign, but in order for it to mean anything it will have to be sustained. Recent years have seen a few other surges in hiring, but so far none of them has lasted for more than two or three months.

Again, the budget dispute in Washington will only make it more difficult for the job market to continue its momentum, and there is more to that dispute than just partisan wrangling. The budget deficit is a fiscal reality that can't help but weigh on the economy for years to come. The job market may overcome that handicap through private sector growth, but expect it to be an uphill battle.

All things considered then, seeing no change in credit card rates during the first half of March shouldn't be much of a surprise. Given the uncertainty and conflicting economic signals, it's natural that credit card companies might want to wait for a clearer trend to emerge before making a decision to raise or lower rates.

Consumer credit card rates

Although there was no change in consumer credit card rates in early March, consumers should remember that at any given time there are big differences between the rates offered from one card to another. This can be an opportunity to get a better rate on future purchases, and to lower the rate on existing credit card debt.

Student credit cards

After declining for the first time in nearly a year in late February, student credit card rates held steady at 17.42 percent in early March.

Business credit cards

The stability in credit card rates gives businesses an opportunity to compare possible alternative credit cards, as well as to evaluate the payback of rewards programs.

Good credit vs. average credit

When shopping for rates it is important for consumers to keep their credit standing in mind. The best advertised rates typically only apply to customers with excellent credit, while rates for people with a flawed credit history may be higher. On average, the difference between the lowest tier of rates and the overall average for consumers is 4.00 percent.

In total, IndexCreditCards.com surveys information from some 50 different credit cards, and includes multiple credit-rating tiers from many of those cards. Examples of offers surveyed include American Express, Capital One, Chase, Citi, Discover, and other MasterCard and Visa branded cards. The information compiled not only demonstrates trends in credit card rates over time, but also indicates the different values credit card companies put on different target markets (consumer, business, etc.), as evidenced by the differences between rates for those markets.

Published 03/15/13 (Modified 03/19/13)

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