Cleveland (PRWEB) October 5, 2009
The average rate on consumer credit cards shot up to over 15% this month, hitting a two-year high, according to the IndexCreditCards.com "Credit Card Monitor" survey. By contrast, during this same two-year period, the Federal Reserve has cut interest rates by almost 5%. This suggests that credit card rates are likely to rise even further when Federal interest rates begin to climb, as they inevitably will.
The average consumer credit card rate is now 15.39%, exactly the same as the average back in September of 2007. This compares to an average rate of 14.99% in mid-August, a significant leap in such a short period of time.
Two factors have contributed to credit card rates' refusal to come down in the face of Federal interest rate cuts. First is the poor economy, which has caused more consumers to default on their credit card obligations. Second is the recently-passed Credit CARD Act, which will restrict or eliminate credit issuer practices seen as unfair to consumers - practices that have been quite profitable for card companies. The recent credit card rate increases aim to beat the Act's "deadline" of February, 2010, when the new rules will make rate increases more difficult.
In addition, credit card rates are likely to go higher from this point forward. Most credit cards have variable-rate formulas that cause rates to move up or down in response to Federal rate cuts or increases. Because the Fed has already lowered interest rates to near zero, there is nowhere to go but up. When the Federal Reserve eventually moves to increase rates, credit card rates will increase as well.
Although, most credit cards have variable rates tied to Federal rates, issuers have traditionally given themselves the option to raise rates "at any time for any reason," hence the recent disconnect between credit card rates and those of the Fed. The new credit card law will make it much more difficult to raise rates on credit card customers.
For a complete report on current average rates in the various credit card categories tracked by IndexCreditCards.com, refer to the site's Credit Card Monitor feature at http://www.indexcreditcards.com/creditcardmonitor/.
Financial institutions represented in the survey include American Express, Bank of America, Capital One, Chase, Citi, Discover, HSBC, PNC/National City, Iberia Bank, Simmons National Bank, U.S. Bank, Wells Fargo, and more.
IndexCreditCards.com offers credit card news, research, and perhaps the most comprehensive index of credit cards available on the Internet today, with a master listing of over 1,200 credit cards as well as categorized lists based on interest rates, reward programs, business credit cards, student credit cards and credit cards for those with poor credit histories.
Credit Card Monitor is a regular survey tracking average credit card rates in multiple card categories.