Nov 15, 2009

Weekly Averages:

• Average consumer credit card rate, overall market: 15.94%
• Average credit card rate, non-reward consumer cards: 14.58%
• Average reward credit card rate: 16.53%
• Average student credit card rate: 15.33%
• Average business credit card rate (non-reward): 13.30%
• Average business reward credit card rate: 14.36%

Credit Card Rate Average Pushing 16%, at Four-Year High
The average rate on consumer credit cards has jumped over a half-point since our last report in late September — up to 15.94% from the 15.39% average reported previously — and credit card rates are now at their highest average since we began tracking card rates in late 2005, a span of over four years. The latest rate jump comes on the heels of the previous month’s increase of almost a half point, meaning average rates have jumped almost one full point since mid-August, and over 2 full points since March of this year.

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 jumped to 14.58% this month, up from 14.27% in our last report, while the average rate for credit cards offering rewards increased to 16.53%, up significantly from the previous 15.87% rate.

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 12.22%, up from 11.86% previously. Breaking that average down further, the average rate that excellent-credit customers can expect on non-reward cards increased to an even 11.0%, up from 10.94% previously, while the average that excellent-credit customers could expect on reward credit cards increased to 12.75%, a half-point increase from last report’s 12.25% average.

Business credit card rates were mixed, with reward cards increasing significantly while non-reward cards actually saw a slight decrease in rates. The average rate for non-reward business credit cards fell to 13.30% from 13.37%, while the average rate for business credit cards with rewards jumped over a half point, to 14.36% from the previous average of 13.83%. A couple of factors contributed to these results. Chase introduced a new line of business credit cards called Ink, with fairly low rates for non-reward cards, while American Express raised rates on some of its reward business cards.

Strangely enough, there was once again no change in the rates being offered to students — the average student credit card rate remains at 15.33%, where it has been all summer. Note that this rate is now lower than the average rate for mainstream credit cards. It is hard to say whether we should interpret this to mean that students are now seen as lower risk than older adults, or whether rates are simply being ignored because so few cards are actually being issued to students.

The average rate on student credit cards remains at 15.33%, the exact same rate we’ve calculated since June. This is hard to explain — there is no precedent for the rates offered on student cards to actually be less than those offered to the mainstream consumer market. As we’ve noted previously, it is hard to say whether this means students are now seen as lower risks than older adults, or whether student card rates are simply being ignored because so few cards are actually being issued in the college market.

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 11/07/09