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Credit card APRs remain on the increase. The national average APRs on new credit card offers have risen for the 4th time in only 5 weeks, resting for now at 12.06%. This information comes from Creditcards.com’s new Weekly Credit Card Rate Report. Here’s a run-down of what’s going on in the credit card industry right now and what that means for you.
Creditcard.com gives us their new weekly rate chart. According to their new report, the national average is 12.06%, up a bit from last week’s 12.04% and quite a bit higher than the average six months ago: 11.58%. Here’s a breakdown of that average. Balance transfer cards lead the pack with overall lowest rates: an average of 10.14%. Low interest cards are next in at 10.53%. Business cards see a large jump–11.41%–with cash back cards coming in close behind with 11.63%. You see another jump when you look at rewards cards which currently have an average rate of 12.10%. Instant approval cards have an average rate of 12.99%, airline cards are at 13.48% and cards aimed at those with bad credit average out at 14.29%. Student credit cards have the highest average rates in the country: 14.45%.
This rise is most likely brought on because banks are wary about losing even more money to unpaid account balances. With the economic situation and high unemployment rate it’s become increasingly more common for people to default and stop paying their credit card bills. Mokrzan, the senior economist at the Huntington Bancorp, said that as unemployment rates continue to rise the credit quality and credit scores of consumers will continue to fall. This means higher borrowing costs for consumers because banks raise rates to make up for this risk. Dennis Moroney, a research director with TowerGroup, goes on to say that banks know they should select the highest rate that they can without excluding themself from the competition.
So what does this mean for you? Well, if you’re the kind of person that faithfully pays your balance each month it means very little. High APRs don’t matter much to people that never let interest accrue on their account.
However, there’s good news for those of you who maintain balances on your credit cards. The economy does shown signs of improvement and that means banks may begin to loosen up and lower some of the recent APR hikes we’ve been seeing. Historically, when the economy improves we see an improvement in credit scores and quality of consumers in addition to lowered interest rates.
Currently, though, banks are not yet showing signs of slowing the rate increases. They’re also restricting their lending to only individuals with the least amount of risk. The Federal Reserve completed its newest Beige Book survey of regional banks and found that the standards for seven of twelve districts have been tightened.
In addition to all this, you may have noticed a definite reduction in the amount of credit card offers you’ve received by mail. Because of the credit restrictions banks are imposing, thousands of people are finding fewer of those pre-approved offers in their mailboxes. Mail Monitor–a tracking service run by Synovate–showed that during the first quarter of 2009 consumers received aboout 372 million credit caard offers. That number is now down a full 67%. Most likely, anyone receiving credit card offers in the mail today has very good to excellent credit.
New research also shows that saving money is at an all-time high and far surpasses the use of credit for most consumers in this country. Banks may be offering fewer credit cards but consumers are keeping up: credit card demand remains very low in the current economy.
If you’re in the market for a credit card or mortgage, keep in mind that your credit history will probably have to be better than ever before. Your best bet if your credit could use some work is this: hang off and work on building a good credit history. Even six months of on-time payments may be enough to see a noticeble improvement in your credit score. Above all else, don’t fall for credit card offers that come with huge interest rates, fees and other unpleasant realities.