Consumer credit card rates dip slightly
September 30, 2010
- Average consumer credit card rate, overall market: 16.75%
- Average credit card rate, non-reward consumer cards: 15.19%
- Average reward credit card rate: 17.43%
- Average student credit card rate: 16.23%
- Average business credit card rate (non-reward): 14.47%
- Average business reward credit card rate: 15.74%
Average credit card rates offered to consumers on new accounts dropped a tad in the last two weeks to 16.75 percent from 16.79 percent, while rates offered to small-business owners and college students remained the same, according to the latest IndexCreditCards.com survey.
Credit card rates appear to have stabilized in the last several months following the rush by credit card companies to jack up interest rates before the bulk of the new Credit CARD Act, signed in May 2009, went into effect in February of this year.
In the last six months, the average credit card rate offered consumers on new accounts has remained between 16.74 percent and 16.85 percent -- a very narrow range. One year ago the average credit card rate for consumers was 15.38 percent.
Rates dropped slightly for both rewards and non-rewards consumer cards, with the average non-reward credit card rate averaging 15.19 percent, versus 15.22 percent two weeks ago and the average reward credit card rate averaging 17.43 percent, compared to 17.46 percent earlier this month.
Reward credit cards typically carry higher interest rates than non-reward cards; the extra finance charges offset the cost of providing cash back, points toward merchandise and other incentives for using the cards.
Average rates for new business credit cards remained parked at 14.47 percent for non-reward cards and 15.74 percent for reward credit cards, while the average rate for new student credit cards stayed at 16.23 percent. Student credit card rates have seen little change in the last six months, barely rising from the 16.24 percent average in late March.
Non-reward credit card rates for business owners have seen more variation, rising to the current 14.47 percent from 13.94 percent six months ago, while reward cards for businesses posted the same average rate in late March -- 15.74 percent -- as they do today.
Most of the rates represented in the survey are variable, which means they include a margin set by the issuer on top of an index, typically the prime rate. Although new credit card regulations prohibit credit card companies from raising the margin they charge on variable rates on new purchases during the first year of an account, rates still can go up when the index rises.
To determine average credit card rates, IndexCreditCards.com takes into account all the various rates charged for each credit card included in the survey. Issuers often charge anywhere from two to four different rates for a single credit card, with the lowest and highest rates varying by a few to several percentage points.
Issuers assign the rates to applicants according to credit ratings. Customers with poor to mediocre credit get offered the highest interest rates, while consumers with excellent credit are offered the lowest rates. The highest rates represented in the survey top 22 percent. Although the Credit CARD Act restricted interest rate increases on existing balances and on new accounts, the new law did not cap interest rates.
According to the latest survey, consumers with excellent credit are offered an average rate of 13.68 percent for reward credit cards and an average rate of 11.17 percent for non-reward credit cards.
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 09/30/10 (Modified 05/14/14)