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Credit Card Rates on the Rise

Fear of delinquency has banks increasing APRs

March 20, 2009

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The Federal Reserve is taking action to lower mortgage interest rates, but rates on credit cards keep rising, according to a weekly report by CreditCards.com.

The national average annual percentage rate on new credit card offers increased this week, according to the CreditCards.com Weekly Credit Card Rate Report, even as the Federal Reserve left its key lending rate unchanged.

The national average credit card APR is comprised of every card found at CreditCards.com. Introductory "teaser" rates are not included in the calculation. Among averages in eight card categories, one rose and seven were unchanged.

With its federal funds rate already near zero, the Fed cannot lower interest rates through traditional monetary policy. Instead, in an effort to encourage lending, the Fed will purchase up to $300 billion of longer-term Treasury securities and introduce the Term Asset-Backed Securities Loan Facility. Experts say both those steps have the potential to lower credit card APRs.

Still, analysts say that rising unemployment — and the resulting threat of credit card losses as consumers fail to make payments — means banks will be unlikely to provide any rate relief to cardholders. Despite a historically low fed funds rate, APRs have increased five out of the last six weeks.

The CreditCards.com credit card rate survey is conducted weekly using offer data from the leading U.S. card issuers. Rate movement may be influenced by changes in the composition of offers tracked.

Introductory offer periods and regular interest rates vary with applicants' credit quality and issuer risk-based pricing policies.

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