Business credit card rates start the new year higher
January 15, 2014
- Average consumer credit card rate, overall market: 16.99 percent
- Average consumer non-rewards credit card rate: 15.48 percent
- Average consumer rewards credit card rate: 17.64 percent
- Average student credit card rate: 17.35 percent
- Average business non-rewards credit card rate: 14.99 percent
- Average business rewards credit card rate: 15.31 percent
The U.S. bank prime rate remained unchanged in the first half of January, making it five years now that the Federal Reserve has held that rate steady at 3.25 percent. Despite that stability, there was an increase in one of the credit card offers tracked by this survey, and it was in an offer with a rate supposedly based on the bank prime rate. This illustrates one of the realities of most interest rate markets -- the Fed's ability to control them does have its limits.
Specifically, a business non-rewards credit card rate rose by 1 percent in the first two weeks of January, pulling the category average up to 14.99 percent. This particular credit card offer describes its rate as the prime rate plus a certain premium. However, even though the prime rate did not change, that premium was increased by 1 percent.
The reality is that as much as the Fed would like to hold interest rates low and steady, credit card companies and other financial decision-makers take their cues from the preponderance of economic conditions, and not just from the Fed. With key interest rates such as mortgage rates and bond yields having risen in 2013, some upward pressure on credit card rates does not come as a complete surprise.
Consumer credit card rates
Average consumer credit card rates have been steady since late October. A stable market is a good environment in which to make rate comparisons, because customers can find the best deal and be reasonably confident that the rate picture will not quickly change before they have even had a chance to use a new card.
Student credit card rates
As college students prepared to head back to school after the holiday break, one thing they did not have to worry about was a change in their credit card rates. Student credit cards held steady at an average rate of 17.35 percent, the same level they have held since September.
Business credit card rates
With an increase in one of the business credit card offers tracked by this survey, the average rate for non-rewards business credit cards rose by 25 basis points, to 14.99 percent. This was something of a surprise simply because this had been the most stable category of credit cards. Its average rate last changed more than two years ago, back in November of 2011.
Because business rewards credit cards held steady while the average rate on non-rewards cards rose, the spread between the two categories shrunk to just 32 basis points. That is less than half what that spread was just two months ago, and the lowest it has been in three years of this survey.
The narrowing of the spread between business rewards and non-rewards credit cards makes rewards programs an especially attractive option to consider. Keys to whether a business opts for a rewards programs include its procedures for regularly deriving value from those rewards, the economic value to the business of those rewards, and the extent to which the business can render the interest rate premium irrelevant by paying balances on time and in full.
Excellent credit vs. average credit
With no change in any of the consumer credit card offers tracked by this survey, the spread between average rates and rates for customers with stellar credit histories remained at 3.93 percent. That rate differential is an example of the financial benefit consumers can get from keeping their credit in tip-top shape.
In total, IndexCreditCards.com surveys information from nearly 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.