Rate survey: Average card APR jumps to all-time high of 16.35 percent

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Kelly Dilworth

Personal finance writer
Specializing in new trends in credit

Average
credit card interest rates set a new record this week, according to the CreditCards.com Weekly Credit Card Rate Report.

The national average card APR climbed to an all-time high of 16.35 percent – nearly a full percentage point higher than it was this time last year.

Chase spurred this week’s rate change by increasing rates on new card offers in tandem with the Federal Reserve’s rate hike. The Federal Reserve raised its
benchmark interest rate by a quarter of a percent in December, causing most
card lenders to hike rates by the same amount. Since then, nearly every major
lender has adjusted rates upward by 0.25 percent.

December’s
federal rate increase was the fifth time the Federal Reserve has boosted its
benchmark interest rate since December 2015. At that time, average card rates
stood at less than 15 percent.

Interest rates are expected to climb again over the next year as the Federal Reserve
continues to retreat from the economic stimulus campaign it began to counter the Great Recession of 2007-2009. The Fed could hike rates by
as much as half a percentage point to a full percentage point in 2018,
significantly affecting how much cardholders pay to carry a balance.

Consumer credit scores on the rise

Despite rising
interest rates on new cards and other variable-rate loans, most consumers are
still managing to pay their bills on time.

According
to research from the credit reporting agency
Experian
, the average credit score rose by 2 points in 2017,
indicating that a growing number of borrowers are maintaining control over their
credit histories and avoiding mistakes that could tank their scores.

Consumers are also enjoying rising scores now that late payments dating back to the recession and its aftermath are starting to drop off their reports.

It
generally takes seven years for a late payment to disappear from a credit report
and 10 years for a Chapter 7 bankruptcy to permanently drop off.


“We’ve made great progress as a
country since the recession.”

According
to Experian, the average consumer credit score is now only 4 points lower than it was in 2007. Just before the credit crisis that
caused many people to fall behind on their bills, the average consumer VantageScore
was 679. By 2017, the average score had recovered to 675.

Consumers
in the Midwest are currently enjoying the highest average credit scores. For
example, among the 10 cities with the best scores, on average, four are in
Minnesota and another four are in Wisconsin. Residents of Minneapolis boast the
highest average scores of all: 709 – up from an average score of 707 in 2016.

Meanwhile,
consumers in the South are more likely to have scores that are well below 700.
In Texas, for example, four cities have average scores below 641. Even in
cities with the lowest average scores, though, credit scores have either
improved over the past year or only slipped by 1 or 2 points.

Consumers aren’t shying away from opening new cards or holding onto bigger balances,
either.

According
to Experian’s latest State of Credit Report, for example, the average card
balance hit $6,354 in 2017.

The average credit card holder currently owns around three cards.

“With
employment and consumer confidence on the rise, we’ve made great progress as a
country since the recession,” said Experian’s Michele Raneri in a news release. “The economy is expected to expand
at a healthy pace this year supported by access to affordable consumer credit
and we believe that credit will continue to rebound.”

















CreditCards.com’s Weekly Rate Report
  Avg. APR Last week 6 months ago
National average 16.35% 16.32% 16.06%
Low interest 13.09% 13.08% 12.83%
Cash back 16.59% 16.56% 16.21%
Balance transfer 15.59% 15.56% 15.34%
Business 13.93% 13.91% 13.68%
Student 15.92% 15.92% 15.14%
Airline 16.32% 16.26% 16.06%
Reward  16.44% 16.41% 16.14%
Instant approval 18.76% 18.74% 18.53%
Bad credit 23.59% 23.59% 23.43%
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: Jan. 17, 2018


See related: Historic credit card rates chart, Poll: 2 in 3 US adults with debt doubt they’ll ever live debt-free




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