Credit card rates at record highs
Credit card trends that are unwelcome
Yesterday, Bloomberg and MSNBC both ran stories about one of the most unwelcome credit card trends: the relentless climb in card interest rates. This will not have come as a surprise to regular visitors to the Index Credit Cards website.
Back on December 15, our Credit Card Monitor revealed that rates for consumer credit cards were higher than they’d been at any time since the survey began in 2005. Specifically, the monitor showed average rates for these on that date as:
- Average consumer credit card rate, overall market: 16.86%
- Average credit card rate, non-reward consumer cards: 15.25%
- Average reward credit card rate: 17.55%
- Average student credit card rate: 16.23%
The only way is up?
John Kenneth Galbraith is reported to have remarked that economists were invented to make astrologers look good. And you sure don’t need a long memory to remember the last time so-called experts in finance and economics got things spectacularly wrong.
However, there does seem to be good cause to believe one prediction that is currently popular: interest rates in general–and credit card rates in particular–are likely to rise further. Why believe that? Well, because the Federal Funds Rate (the rate at which banks lend to each other, usually overnight, through the Federal Reserve) remains close to its all-time low. It was briefly 14 percent in May 1981; it was 6.25 percent in 2006; since February 2009, it’s remained at 0.75 percent. You see? Nowhere much to go but up.
Credit card trends that are more welcome
Of course, not all current credit card trends are bad. Two weeks ago, this blog covered a recent revival in the mailing of credit card offers. According to Mintel Comperemedia, 1.2 billion such solicitations were mailed in the third quarter of last year, compared with 391 million during the same period in 2009. And that means more competition to win your business.
Credit card rewards critical
The Mintel Comperemedia paper report observed that card issuers were refining and improving programs. Credit card rewards were tending to be available on more and more everyday items, and limits, caps and restrictions were getting fewer. Andrew Davidson, who’s a senior vice president of Mintel Comperemedia, remarked:
“Creative reward strategies will win new customers, but there will always be the threat from the next great rewards innovation. Therefore, issuers need to seek new ways to leverage rewards programs to seek loyal customers post acquisition.”
In fact, they’ve already started. Just two days ago, Citi credit cards unveiled four new ThankYou products that are supposed to allow customers to choose from a range of rewards program options.
Choosing the best credit card offers
As the credit card monitor data shows, credit cards with rewards on average charge higher interest rates than those without. If you often or always carry a substantial balance forward, you may well find that you’d be better off opting for low interest credit cards rather than points or cash back.
Disclaimer:The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.
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