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Credit card rates: the calm in an economic storm


October 15, 2011

Current averages:

  • Average consumer credit card rate, overall market: 16.80 percent
  • Average consumer non-rewards credit card rate: 14.88 percent
  • Average consumer rewards credit card rate: 17.63 percent
  • Average student credit card rate: 16.59 percent
  • Average business non-rewards credit card rate: 14.11 percent
  • Average business rewards credit card rate: 15.76 percent

credit card rates Oct. 15, 2011

    The prime rate for U.S. banks remained unchanged in early October, at 3.25 percent.

    Rates in most credit card categories remained stable, and perhaps consumers should be grateful that the status quo held. After all, both mortgage rates and Treasury yields rose in the first half the month. It was something of a roller-coaster ride for those rates, as they first fell sharply as October began, but then rose by even greater amounts by the middle of the month.

    Credit card rates and Operation Twist

    This roller-coaster was largely in reaction to economic developments. The announcement of the Federal Reserve's Operation Twist triggered an initial plunge in rates, which seemed to be based largely on pessimism about the economy.

    However, by the second week of October, investors had moved on to optimism over the fact that a resolution seemed to be taking shape to address some of Europe's sovereign debt worries. It won't be long before the next major piece of economic news sends the interest rate markets scurrying again, in one direction or another.

    Meanwhile, credit card offers are somewhat insulated from these day-to-day market gyrations. Credit card companies don't want to subject consumers to a series of frequent changes, so credit card rates tend to respond more to long-term interest rate trends than to daily or weekly market moves. Given how erratic the interest rate markets have been, and the fact that they trended towards higher rates overall, this insulation from short-term changes was a blessing for credit card customers in early October.

    Consumer credit card rates

    Consumer credit card rates were unchanged for the second consecutive survey. This stability creates a settled environment in which consumers can shop for rates and kick the tires before choosing a new card.

    Finding a credit card with a lower rate can be a good way to save money for consumers who tend to carry credit card balances from one month to the next. They can save on new balances, and also on existing balances if they transfer those balances to a new card at a lower rate.

    However, consumers should be aware that rates on transferred balances are not always the same as the rates on new purchases, and that there is often a fee to make the transfer. Before making a transfer between cards, consumers should carefully check the terms and conditions of both cards.

    Business credit card rates

    The average rate in both business credit card categories dropped noticeably, by 36 basis points for non-rewards cards, and by 27 basis points for rewards cards. However, this was due to a change in the constituents of each sample.

    Capital One has rebranded its business credit cards as the "Spark" series of cards, while discontinuing their prior credit card offerings. As a result of these changes, Capital One no longer has a non-rewards business credit card, and eliminating their former offering from this category caused the average rate to drop.

    The Capital One Spark series does included several business rewards offerings, and two of these were added to that category's sample. Since the average rate tier of these cards was lower than that of the card they replaced, this category average dropped as well. The overall consumer rate reported above is not affected by business credit card rates.

    Student credit card rates

    The average rate for student credit cards remained at 16.59 percent, making this the third straight survey with no change in this category.

    Good credit vs. average credit

    With no change in consumer credit card rates, the difference in rates for people with top credit ratings and those with average credit remained at 4.09 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 credit cards, 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 10/15/11 (Modified 05/13/14)

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