April 30, 2010

• Average consumer credit card rate, overall market: 16.78%
• Average credit card rate, non-reward consumer cards: 15.51%
• Average reward credit card rate: 17.33%
• Average student credit card rate: 16.27%
• Average business credit card rate (non-reward): 13.75%
• Average business reward credit card rate: 15.74%

Credit card rates remained relatively stable since our last report, as the credit card market continued to settle since sweeping federal regulations went into effect in February. The most notable changes, in fact, were rate declines for student credit cards and non-rewards business credit cards.

Overall rates for consumers seeking new credit cards barely inched up to 16.78% since mid-April’s Credit Card Monitor average of 16.76%. The small increase was due to a rise in average rates for non-reward credit card offers, which rose to 15.51% from 15.43%. The average rate for reward credit cards stayed the same at 17.33%.

To pinpoint a single “average” rate, IndexCreditCards.com attempts to include all of the various rate tiers that card issuers offer based on applicants’ credit histories. Consumers with better credit typically can qualify for credit card offers below the average, while those with less-than-perfect credit histories are likely offered rates higher than the average. It’s not unusual for credit cards rates to differ by 10 percentage points for the same card, depending on the customer’s credit history.

According to our most recent survey, consumers with excellent credit were offered an average rate of 13.52% for reward credit cards and an average rate of 11.09% for non-reward credit cards. For customers with poor credit, rates in many cases exceeded 19%.

Average credit card rates actually dipped a bit for both small-business owners and college students. While the business reward credit card rate remained stable at 15.74%, the rate for non-reward business credit cards declined to 13.75% from 13.94%. Observers are watching the business credit card market closely because it’s not subject to the new consumer protections that went into effect as a result of the Credit CARD Act. Credit card rates for small businesses are especially critical today because many entrepreneurs are relying more heavily on credit cards versus bank loans due to the tight credit market.

Meanwhile, credit card rates for college students dropped to 16.27% from 16.45%. New federal rules require young people under 21 to get a co-signer unless they can show they have sufficient income to pay their credit card bills. Whether rates for students will continue to drop as a result remains to be seen.

All the average rates for new credit card offers are higher than they were just six months ago. Average rates for each category in early November were nearly one percentage point less than what consumers are offered today. The average overall consumer credit card rate, for instance, was 15.94%, compared to the current 16.78%. The average student credit card rate was 15.33%, versus today’s 16.45%, and the average business rewards credit card rate was 14.38%, compared to today’s 15.74%. Rates went up through the latter half of 2009 as credit card companies braced themselves for the new federal regulations which, among other things, ban them from hiking rates on current balances.

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 04/30/10