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Credit Card Rates Up Over One Full Point in 2006

by Peter Andrew

Credit Card Rates Up Over One Full Point in 2006

Average credit card rates jumped again this

week, leading to an average increase of over one full point

for consumer credit cards in 2006, according to the weekly IndexCreditCards.com

Credit Card Monitor.

The average interest rate for consumer credit cards offering

no rewards increased to 13.80% this week. This average stood

at 12.6% on January 1. (The average rate for consumers with

the very best credit is currently 10.89%.)

For consumer cards offering rewards, the increase is similar,

with a current average APR (Annual Percentage Rate) of 15.18%.

This average stood at 13.64% on January 1. (The average rate

for consumers with excellent credit is 12.79%.)

The average APR for college student credit cards has moved over

the 16% mark, to 16.02%. While this is significant, it's actually

a smaller increase than other consumer categories. This average

stood at 15.18% on January 1.

"The Federal Reserve has raised interest rates twice in 2006,

but in total that equals only a half-point increase," said Adam

Jusko, Research Director for IndexCreditCards.com. "That means

many credit card issuers have decided on increases beyond what

the Fed has instituted. We've seen several issuers re-do their

rate structures, including increases to fixed-rate credit cards

and significant bumps in tiered-pricing rates.

"In particular we've noticed that credit cards offering cash

back rebates have been more aggressive in raising rates for

customers who carry balances. While we always recommend against

rebate cards if you carry balances, the penalty for doing so

has increased."

One group has consistently bucked the interest rate trend: small

business credit card customers. The average non-reward business

credit card rate stands at 11.39%, barely up from the 11.33%

at the year's beginning. Reward business cards offer an average

13.51% APR, up slightly from 13.21% at the beginning of 2006.

This is due to both increased competition in this space among

credit card issuers and the need for applicants to have stronger

credit scores to qualify.

Financial institutions represented in the survey include Advanta,

American Express, Bank of America, Capital One, Chase, Citi,

Discover, MBNA, National City, Providian, Pulaski Bank, U.S.

Bank, Wachovia, Wells Fargo and more.

Published 04/18/06 (Modified 05/07/12)

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