Rate survey: Average card APR continues to climb

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Kelly Dilworth

Personal finance writer
Specializing in new trends in credit

The
average credit card interest rate hit another record high this week, according
to the CreditCards.com Weekly Credit Card Rate Report.

The
national average APR climbed to 16.24 percent Wednesday. A year ago, the
average card APR clocked in at just 15.27 percent.

Several
card issuers hiked rates this week after the Dec. 13 Federal Reserve rate increase. The Fed increased its benchmark interest rate by another 0.25
percent. When the Federal Reserve alters interest rates, most card issuers
revise rates by the same amount.

The
average card APR is expected to rise again over the next several weeks as more
lenders boost rates on new cards.

Interest
rates on new credit card offers have climbed significantly over the past year
in tandem with multiple federal interest rate increases. As a result, the
number of cards with a maximum APR above 25 percent has jumped from 19 cards in
December 2016 to 25 cards in December 2017.

Consumers increase card usage

Consumers increasingly are relying on credit cards to make payments instead of cash or debit. According to new research from the Federal Reserve, credit
card usage climbed to 10.2 percent in 2016 over cash and debit cards.

Overall card
payments, including prepaid cards and debit cards, also increased last year.
However, growth in debit card usage slowed somewhat since 2015, indicating
that more people are reaching for credit cards when paying with plastic instead
of debit.

The Fed’s
study supports previous research that has also revealed consumers are
increasingly favoring credit cards over other payment methods – including
debit.

A 2016
survey by the payment processor TSYS, for example, found a growing number
of cardholders say they prefer credit cards instead of cash or debit cards to
make purchases. “Credit cards replaced debit cards as the ‘most preferred
payment form’ for the first time since we began conducting the surveys,” wrote
TSYS in the report. Previously, debit cards were the
most popular payment method. The TSYS
study also found many consumers often use debit cards for smaller everyday
purchases, such as gas and groceries, and credit cards for larger ones.

Remote
payments are also becoming more popular as a growing number of cardholders use credit cards for e-commerce and online bill payments, for example, the Federal Reserve found.
More than 22 percent of all payments on general-purpose cards occurred remotely
in 2016, up from nearly 21 percent in 2015. 

“For
some time, the rate of growth of remote general-purpose card payments has
outpaced the rate of growth of in-person card payments,” wrote the Fed in its
report. “For example, from 2015 to 2016, remote general-purpose credit card
payments increased at a faster rate (16.6 percent) than in-person payments (7.9
percent).”
















CreditCards.com’s Weekly
Rate Report
  Avg. APR Last week 6 months ago
National average 16.24% 16.21% 15.96%
Low interest 12.97% 12.95% 12.80%
Cash back 16.46% 16.43% 16.12%
Balance transfer 15.46% 15.44% 15.19%
Business 13.78% 13.76% 13.74%
Student 15.82% 15.76% 14.98%
Airline 16.17% 16.14% 15.88%
Reward  16.32% 16.29% 16.02%
Instant approval 18.62% 18.62% 18.32%
Bad credit 23.55% 23.52% 23.29%
Methodology:
The national average credit card APR is comprised of 100 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.)
Source: CreditCards.com
Updated:
Dec. 27, 2017


See related: Historic credit card rates chart, Infographic: Store card applications surge around the holidays, Fed: Card balances surged by $8.3 billion in October




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