July 15, 2011

Current averages:

• Average consumer credit card rate, overall market: 16.43 percent
• Average consumer non-rewards credit card rate: 14.88 percent
• Average consumer rewards credit card rate: 17.09 percent
• Average business non-rewards credit card rate: 14.60 percent
• Average business rewards credit card rate: 16.05 percent
• Average student credit card rate: 16.67 percent

The US prime rate remained unchanged at 3.25 percent. This rate is set by the Federal Reserve, and is often used as a starting point for setting credit card rates.

Like the prime rate, most of the rates in the IndexCreditCards.com survey were unchanged in the first half of July. While both the prime rate and individual credit card rates are affected by changes in the market environment for interest rates, they are both somewhat insulated from day-to-day market movements by decision-making mechanisms. This involves the Federal Reserve in the case of the prime rate, and corporate management structures in the case of credit card companies.

This insulation can be useful in cases such as the past month, which has seen some wild fluctuation in market interest rates, even while the prime rate and most credit card rates have remained steady. For example, 10-year Treasury yields bottomed out at 2.87 percent on June 24th, before rallying to 3.20 percent on July 1st. By mid-July though, those yields were back down around 2.9 percent again.

For policy reasons, the Federal Reserve does not change the prime rate with anything like that alacrity, and credit card companies are also more deliberate about making changes, for regulatory and business reasons. This relative stability works to the advantage of customers. It makes the time spent comparing credit card offers worthwhile, because those rates are not likely to change on a day-to-day basis.

Consumer credit card rates

There were changes in both the non-reward and reward credit card categories in the first half of July, though for different reasons.

The average rate for non-reward credit cards fell to 14.88 percent, from its previous level of 15.09 percent. However, this was due to an updating of the credit cards covered by the survey, rather than being reflective of any interest rate trend in this category.

On the other hand, the change in rewards credit cards did reflect a change in the average interest rate of the credit card offers surveyed. Reward credit cards dropped to an average rate of 17.09 percent, from their previous level of 17.48 percent. This was due to a reduction in the interest rate range offered on the Capital One No Hassle Cash Rewards Card.

As a result of changes in both sub-categories, the overall average rate for consumer credit cards dropped. It now stands at 16.43 percent, down from 16.76 percent.

Business credit card rates

There was a change in the average rate for business non-reward credit cards, but this was due to an updating of the sample constituents. As a result, the average rate for business non-rewards credit cards dropped slightly to 14.60 percent, from a previous level of 14.62 percent.

There were no changes in any of the credit card offers surveyed for business rewards credit cards.

Student credit card rates

Student credit card rates continued their recent run of consistency. The average rate in this category remained at 16.67 percent, unchanged since late April.

Good credit vs. average credit

There was virtually no change in the difference between average rates for consumers with good credit, and for those with average credit histories. This differential was at 4.10 percent in early July, down a negligible amount from the reading of 4.11 percent in late June.

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 American Express, Capital One, Chase, Citi, Discover, MasterCard, and Visa. 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 by the differences between rates for those markets.

Published 07/15/11