December 15, 2009

Credit Card Rate Averages:

• Average consumer credit card rate, overall market: 16.36%
• Average credit card rate, non-reward consumer cards: 14.67%
• Average reward credit card rate: 17.09%
• Average student credit card rate: 15.91%
• Average business credit card rate (non-reward): 13.39%
• Average business reward credit card rate: 14.53%

Average Credit Card Rate Breaks the 16% Barrier
Credit card issuers continue to raise rates on their offers to new customers — leaving customers who are frustrated by hikes on their current cards with few good options. For the first time since IndexCreditCards.com began tracking rates in 2005, the average credit card rate has broken 16% — jumping to 16.36% today, from 15.94% at this time last month. This is the latest in a succession of increases that has caused average rates to skyrocket by over two-and-one-half points just since March of this year.

In previous years, our advice has been simple: if your card company plays hardball with your interest rates, get a new card. After all, there were plenty of other companies hungry for your business. Unfortunately, times have changed, and seeking rescue in a new credit card after being treated poorly by your current issuer is no longer a slam dunk. Perhaps the best advice we can give in these troubling times is to have a few cards on hand and patronize whichever company treats you the best.

The reasons for the rapid escalation in rates have not changed — the poor economy has caused rising defaults among current card holders, and the recently passed Credit Card Act, which will make it more difficult for issuers to raise rates, has the card companies scrambling to hike rates before the new rules fully kick in this coming February.

(NOTE: In pinpointing a single “average” rate, IndexCreditCards.com attempts to include all of the various rate tiers that card issuers offer based on an applicant’s credit history, as well as the different rates associated with non-reward versus reward cards. Consumers with better credit histories can often find offers well beneath this average, while those with bad credit histories will likely be offered rates higher than the average.)

Breaking down the averages further, the average credit card rate for non-reward consumer credit cards rose slightly this month, up to 14.67% from 14.58% last month.

The bigger story — and the main reason for the higher overall jump — is the profound increase to rates on reward credit cards. The average rate for credit cards offering rewards is now 17.09%, up from 16.53% last month, and up over 2 full points in just the last 6 months.

While the averages listed above attempt to take into account the multiple tiers that many credit card issuers offer, IndexCreditCards.com also tracks the very lowest listed rates, those reserved for customers with the very best credit. For the market as a whole, customers with excellent credit are now seeing an average rate of 12.58%, up from 12.22% last month. Breaking that down further, the average rate excellent-credit customers can expect on non-reward cards remained 11.0% this month (the only average in this month’s survey that did not rise), while the average excellent-credit customers could expect on reward credit cards jumped a half point to 13.25%, up from 12.75% previously.

Business credit card rates also increased this month, although not nearly as dramatically. The average rate for non-reward business credit cards increased to 13.39% from the previous average of 13.30%, while the average rate for business credit cards with rewards increased to 14.53%, up from 14.36% last month and now up over 1 full point since June.

The average student credit card rate jumped over a half-point this month, to 15.91% from 15.33% previously. With relatively few student cards on the market, this average is easily swayed by the moves of any single issuer — in this case, Chase significantly raised the rates offered on its Chase +1 card since our last report.

Financial institutions represented in the survey include American Express, 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 12/15/09