Credit Card Rates Rise Slightly, More Increases on the Way
November 04 2005
Credit card rates rose only slightly this week, but Tuesday’s announced increase in federal lending rates signaled more hikes to come, according to the IndexCreditCards.com weekly Credit Card Monitor.
"Just as the previous Fed increase had finished making its impact on credit card rates, another quarter-point increase comes along and promises to raise rates again," said Justin McHenry, Research Director for IndexCreditCards.com. "Contrary to speculation last week after the nomination of Ben Bernanke as Federal Reserve chairman, it now appears we'll see more hikes in the next few months."
Many credit cards are variable-rate, meaning their interest rates are based on a formula that includes a base rate plus a percentage tied to federal lending rates. When federal rates move up, as they are doing now, credit card rates follow.
This week's average credit card rates:
"Top-level" consumer credit cards averaged a 9.74% Annual Percentage Rate (APR), up slightly from 9.72%. The lowest rate found for consumer credit cards with no annual fee was the Capital One "Prestige" Platinum MasterCard, offering a 5.9% APR. This week Capital One split their Platinum MasterCard into two different offerings, a 5.9% "Prestige" card and an "Above Average Credit" card, offering an 8.9% APR.
Top-level business credit cards remained at an average 9.91% APR for the third straight week. Both the Advanta Platinum BusinessCard and the Chase Platinum Business Card offer a 7.99% APR.
IndexCreditCards.com uses "top-level" to describe Platinum or similarly designated credit cards that generally offer the lowest interest rates to eligible cardholders.
Other rates of note:
Consumer reward cards rose to an average 10.89% APR, up from 10.85% last week. MBNA offers a number of cards in this category with a published rate of 7.9%, e.g., the Elite Rewards MasterCard.
Business reward credit card averages rose again this week, with an average interest rate of 11.64%, up from 11.57%. The Advanta Platinum BusinessCard referenced above was the lowest rate business reward credit card at 7.99%.
Student credit card rates increased slightly, with an average 14.85% APR, up from 14.83%. The Wachovia Student Visa and the Sovereign Bank Student Card both offer eligible students a 9.9% rate.
"As always, our averages are based on the lowest rates published by the issuing credit card banks," said McHenry. "If you don't have excellent credit, add 2% to these averages to estimate your rate. Those with poor credit will be offered even higher rates."
Financial institutions represented in the survey include Advanta, American Express, Bank of America, Capital One, Chase, Citi, Discover, MBNA, National City, Providian, Pulaski Bank, U.S. Bank, Wachovia, and Wells Fargo.