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Credit Card Interest Rates Monitor - February 15, 2010


February 15, 2010

  • Average consumer credit card rate, overall market: 16.70%
  • Average credit card rate, non-reward consumer cards: 15.36%
  • Average reward credit card rate: 17.28%
  • Average student credit card rate: 15.82%
  • Average business credit card rate (non-reward): 13.45%
  • Average business reward credit card rate: 15.27%

Credit Card Rates Jump in Anticipation of Credit Card Act Implementation
Credit card rates have leaped significantly in the past month, as the credit card industry continues to brace itself for the full impact of the Credit Card Act, the bushel of new rules and regulations which aim to create a fairer marketplace but which have left card issuers scrambling to make up for anticipated lost profits. The majority of the law's remaining tenets, which include restrictions on rate increases on existing card balances and the elimination of over-the-limit fees for most cardholders, will be in force beginning February 22.

In our latest calculations, the average credit card interest rate being offered to those seeking new credit cards is 16.70%. This represents an almost half-point jump in the last month, and it is the highest average calculated since the survey's inception in 2005. In addition, with most cards offering variable rates that rise with Federal interest rates, there is nowhere to go but up, as Federal rates are still at an all-time low.

(NOTE: In pinpointing a single "average" rate, IndexCreditCards.com attempts to include 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 better credit histories can often find offers well beneath this average, while those with bad credit histories will likely be offered rates higher than the average.)

Breaking down the averages further, the average credit card rate for non-reward consumer credit cards jumped to 15.36% this month, up significantly from the 14.75% rate of last month. The average rate for reward credit cards also rose, up to 17.28% from the previous average of 16.94%.

While the averages listed above attempt to take into account the multiple tiers that many credit card issuers offer, IndexCreditCards.com also tracks the very lowest listed rates, those reserved for customers with the very best credit. For the market as a whole, customers with excellent credit are now seeing an average rate of 12.59%, up from last month's 12.34% average but comparable to December's 12.58%. This suggests that even in this tough rate environment, excellent-credit consumers are still desirable to credit card issuers. Breaking that 12.59% rate down further, the average rate excellent-credit customers can expect on non-reward cards increased to 11.11% from the previous 11.0%, while the average rate that excellent-credit customers could expect on reward credit cards jumped to 13.23% from the previous 12.91%.

Business credit card rate averages also rose, especially those on reward cards. The average rate for non-reward business credit cards increased slightly to 13.45% from 13.39%, but the average rate for business credit cards with rewards went up significantly, to 15.27% from the previous average of 14.53%.

The average student credit card rate actually decreased slightly this month, to 15.82% from the previous month's 16.00%. Currently we are not putting much stock in the rates we are seeing advertised on student credit cards -- a major piece of the Credit Card Act will shut out many under-21 students from gaining credit altogether unless they have proof of income or a co-signer. We expect that some issuers will stop offering student credit cards, with the smaller market and more-restrictive policies making students less attractive to pursue.

Financial institutions represented in the 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 02/15/10 (Modified 01/13/11)

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