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.
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