Saturday, November 28, 2009

BofA rate hikes push national average credit card APR higher

Higher rates, economic struggles likely to dampen holiday spending

By Jeremy M. Simon

Interest rates on new credit card offers rose slightly this week, according to the Weekly Credit Card Rate Report, as Bank of America increased rates on two of its cards.'s weekly rate chart
Avg. APR Last week 6 months ago
National average 12.71% 12.68% 12.24%
Business 9.74% 9.49% 16.74%
Low interest 11.65% 11.65% 12.22%
Cash back 12.08% 12.08% 12.06%
Balance transfer 12.13% 12.07% 10.99%
Reward 13.29% 13.29% 13.01%
Instant approval
13.32% 13.32% 10.74%
Airline 13.60% 13.60% 12.96%
Bad credit 13.74% 13.74% 11.37%
Student 14.89% 14.89% 14.52%
Methodology: The national average credit card APR is comprised of 95 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Updated: 11-25-2009

The national average credit card annual percentage rate rose to 12.71 percent, up from 12.68 percent the previous week and 12.24 percent six months ago. The average is calculated from about 95 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing nine major categories of credit cards. Introductory (teaser) rates are not included in the calculation. Among the average APRs in the nine categories, two jumped higher and seven were unchanged.

This week's increase in the average was due to Bank of America hiking the interest rates on some of its cards. It's far from alone: Two months ago, the average stood at 12.32 percent; six months ago, it was 12.24 percent.

With BofA and many other banks continuing to raise APRs, some experts say cardholders will remain hesitant to charge purchases, limiting the economic recovery. On Tuesday, data showed third-quarter gross domestic product growth was weaker than previously estimated, due to restrained consumer spending.

That trend is likely to continue: A survey released Monday by the Consumer Federation of America and the Credit Union National Association showed that 43 percent of consumers plan to cut back on holiday spending this year, with nearly a quarter of poll respondents expressing concern about meeting monthly credit card payments.

Those numbers represent an improvement over last year's holiday survey, but they still display far more consumer pessimism than the numbers seen before the economic recession began.

"During these recessionary times, more people have been seeking to pay down debt and build up their savings," CUNA Chief Economist Bill Hampel said in a press release."We certainly have seen that behavior among the nation's 92 million credit union members. Our survey indicates the pattern is continuing into the holiday season."