February 28, 2011

Current averages:

• Average consumer credit card rate, overall market: 16.82 percent.
• Average credit card rate, non-reward consumer cards: 15.27 percent.
• Average consumer reward credit card rate: 17.48 percent.
• Average student credit card rate: 16.40 percent.
• Average business credit card rate (non-reward): 14.72 percent.
• Average business reward credit card rate: 16.21 percent.

The most recent survey by IndexCreditCards.com found most categories of credit card offers unchanged in the second half of February, but there was a reduction in the category of consumer reward credit card rates. This also contributed to a drop in the overall market rate for consumer credit cards.

A significant reason why credit card offers have been so consistent is that many credit card issuers base their credit card rates on the bank prime rate. This rate has been at 3.25 percent since the beginning of 2009. Two noteworthy things about the prime rate: first, 3.25 percent is unusually low, and second, two years is an unusually long time for the prime rate to stay at one level. This suggests that credit card rates could become more variable, and higher in general, with a return to a more normal interest rate environment.

Consumer credit card rates

Consumer credit card rates fell slightly since the last survey, from 16.89 percent to 16.82 percent. This drop of 0.07 percent was due primarily to a decline of the same amount in the consumer reward credit card category, which declined to 17.48 percent from 17.55 percent. This drop did not represent a widespread change in rates by card issuers in the category; the relative slightness of the change reflects the fact that virtually all credit card rates in the consumer reward category remained unchanged.

The average rate for consumer non-reward credit cards also dropped slightly in the most recent survey, to 15.27 percent from 15.32 percent. However, this was because of an update to the survey constituents rather than a change in the rates of any cards in the category.

Business credit cards

Business credit card offers remained stable in both the reward and non-reward categories, at 16.21 percent and 14.72 percent, respectively. This continues a long period of stability for these cards. The average rate for business reward credit card offers has not changed since the end of October, and the average rate for non-reward business credit cards has not changed since the end of September.

This stability does not mean that the market for business credit cards is entirely flat. In fact, within the category, there is a significant variance in credit card offers. Rates on business reward credit cards, for organizations with excellent credit, vary by 5.75 percent. Rates on non-reward credit cards vary by over 10 percent. So, while the category has been quiet on average, there are worthwhile differences to be found within the category.

Student credit cards

Student credit cards stabilized in the most recent survey, after having seen the biggest change in the previous survey. The average rate on student credit card offers remained at 16.40 percent, after having risen from 16.23 percent in late January/early February. Given that steep rise in the prior survey, this remains an important category to watch. The weeks and months ahead will tell whether that sharp jump was a hint at a coming trend, or if the more recent return to stability will once again be the norm for this category.

Good credit vs. bad credit

There continues to be a substantial advantage in credit card rates available to consumers with excellent credit. Rates for those customers were 4.17 percent lower than the overall average in the non-reward category, and 3.95 percent lower than the overall average in the reward category.

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 institutions surveyed include Bank of America, HSBC, Citi, American Express and Capital One. 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 in the differences between rates for those markets.

Published 02/28/11