Current Averages:

• Average consumer credit card rate, overall market: 16.85%
• Average credit card rate, non-reward consumer cards: 15.43%
• Average reward credit card rate: 17.46%
• Average student credit card rate: 16.27%
• Average business credit card rate (non-reward): 13.75%
• Average business reward credit card rate: 15.74%

After rising steadily in the last 18 months, credit card rates remain perched at their highest levels since IndexCreditCards.com began surveying rates five years ago.

Rates remained steady in the last month, with no changes in any of the major categories of credit cards, according to the latest sampling by IndexCreditCards.com.

The average rate offered to the overall consumer market for new accounts is 16.85%, although applicants with excellent credit can do better, finding average rates at 12.88%. The overall rate includes both rewards and non-rewards credit cards.

Many credit card offers feature tiered rates, which are geared to consumers’ credit scores. Those with the best credit ratings get the lowest rates, and consumers with mediocre to poor credit have to make do with the highest rates. To determine a single “average” rate, IndexCreditCards.com includes all the various rate tiers that credit card companies offer for a particular card. Some rate tiers vary by as much as 10 percentage points for the same credit cards, with the highest rates topping 20% in some cases.

These rates are particularly high, considering that most are variable and tied to the prime rate, which has nowhere to go but up as the economy eventually recovers. Although new federal credit card regulations restrict issuers in raising the margin they charge on top of the index, variable rates can still rise when the underlying index goes up.

Rates for business credit cards and student credit cards are lower than those for the overall market. New federal credit card regulations don’t apply to the business card market, although some issuers are voluntarily extending key consumer protections to small-business owners. Business credit card rates have remained fairly steady in the last few months.

The student credit card landscape has shifted dramatically since the Credit Card Accountability, Responsibility and Disclosure Act went into effect. Issuers no longer can market credit cards on campuses or give away freebies to students for filling out credit card applications. They also must require co-signers for applicants under 21 with no regular income to pay their bills. Still, average student credit card rates, now at 16.27%, have remained fairly steady since the bulk of the new regulations went into effect in February 2010.

More new credit card rules are on the way. Starting Aug. 22, late fees are capped at $25, and issuers can’t charge late fees that exceed the amount due, or over-limit fees that exceed the amount by which the cardholder went over the credit limit. In addition, credit card issuers must reconsider interest rate increases they imposed since Jan. 1, 2009, when many credit card companies began ratcheting up rates in anticipation of the Credit CARD Act, signed into law in May 2009. The law requires issuers to lower rates on those accounts if the reasons for the hikes no longer exist.

But that rule doesn’t apply to rates offered on new accounts. How the pressure on issuers to lower rates on existing accounts will affect what they charge on new accounts is anybody’s guess. But experts have predicted throughout the debate on credit card rules that increasing regulation will lead to higher rates overall.

Financial institutions represented in the survey include American Express credit cards, 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 07/15/10