April 15, 2010

• Average consumer credit card rate, overall market: 16.76%
• Average credit card rate, non-reward consumer cards: 15.43%
• Average reward credit card rate: 17.33%
• Average student credit card rate: 16.45%
• Average business credit card rate (non-reward): 13.94%
• Average business reward credit card rate: 15.74%

Average credit card rates offered to consumers for new accounts have actually slipped a bit since the latest Credit Card Monitor report in mid-March.

It was the first time the overall rate went down–even by a sliver of a percentage–since issuers began ratcheting them up last year in anticipation of new federal credit card regulations, according to the new survey by IndexCreditCards.com.

The overall consumer credit card rate dropped slightly to 16.76% from the mid-March level of 16.80%. Rates for rewards credit cards continue to be higher than non-rewards cards, but average rates in both categories dropped slightly. Average non-reward card rates fell to 15.43% from 15.53%, and average reward credit card rates slipped to 17.33% from 17.35%.

The change could point to a stabilization in the credit card market as issuers adjust to the new regulatory landscape created by the Credit CARD Act, signed into law in May 2009. Most of those new rules went into effect in August 2009 and in February of this year. Among the most significant new rules are a ban on arbitrary rate increases on current balances, a restriction on rate increases on new purchases during the first year of an account, and a prohibition on double-cycle billing.

Although rates appear to have stabilized, overall consumer credit card rates are almost a percentage point higher than they were over six months ago when the survey pegged the average rate at 15.94%.

Meanwhile, average rates for student credit cards rose slightly to 16.45% from 16.24%. Credit card companies now are restricted in how they market to college students, and they can’t issue cards to young people under 21 unless the borrowers can prove they have sufficient independent income or get a parent to co-sign. How these changes will impact rates in the long term has yet to be seen. So far, student credit card rates have remained relatively stable, and they’re still under the overall market average.

Business credit cards are another area of speculation because they aren’t subject to the consumer protections included in the new federal credit card regulations, such as the ban on arbitrary rate increases. Rates for business credit cards–both rewards and non-rewards cards–remained the same since the last Credit Card Monitor report.

To calculate a single “average” rate, IndexCreditCards.com takes into account all of the various rate tiers that card issuers offer based on an applicant’s credit history, as well as the different rates associated with non-reward versus reward cards. Consumers with excellent credit can find offers below the overall average rate, and those with poor credit are typically stuck with higher rates. The difference between rates for poor and excellent credit can range as much as 10 percentage points for the same credit card.

The average overall credit card rate for customers with excellent credit was 12.74%, compared to the average rate for all customers of 16.76%.

Financial institutions represented in the IndexCreditCards.com survey include American Express, Bank of America, Capital One, Chase, Citi, Discover, HSBC, PNC/National City, Iberia Bank, Simmons National Bank, U.S. Bank, Wells Fargo, and more.

Published 04/15/10