With today’s erratic economy, nothing is necessarily normal when it comes to interest rates, although averages are always being calculated. Average credit card interest rates do seem to be higher than they have been over the past several years for several types of credit cards, although low interest credit cards are still available with rates that remain on the very low end of the scale.
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Credit card interest rates typically rise and dip along with the nation’s prime rate. When the prime rates are high, interest rates generally rise up to match, just as low prime rates usually mean low interest rates.
Current Average Credit Card Interest Rates
Credit card interest rates also vary depending on the types of credit cards as well as the type of transactions for which the credit card is being used. CNN Money offers a rundown of average credit cards rates on any given day, and a snapshot from March 12, 2012, did show an increase in interest rates from the previous week in all categories except one.
Balance transfer interest rates were at 16.21%, up slightly from 16.20% while low interest credit card rates were at 10.66%, up from 10.78%. Rewards credit cards were also a tad higher, at 15.52% versus the previous week’s 15.51%, and cash back interest rates rose to 16.49% from 16.47%. The only interest rate that was lower than the previous week was for business credit cards, which dipped to 13.40% from the previous week’s 13.45%.
Another credit card interest rate you may come across that is not listed by CNN Money, is the penalty interest rate. Credit card companies may put penalty interest rates into play on your transactions if you fail to pay your bills on time or otherwise fail to follow the rules set down in your credit card agreement, according to the Federal Reserve.
Introductory interest rates are another interest rate that may not follow the averages. An introductory APR can be as low as 0%, although the rate will only remain in place for a limited, introductory period.
How Current Credit Card Rates Compare to Those from Past Years
Current credit card rates are both higher and lower than the average over the past several years, depending on the type of credit card. The summary of average credit card rates provided by the Federal Reserve does not differentiate between credit card types or different transactions. It instead calculated an annual average by tallying up the APRs on all credit card types offered by institutions that reported their information.
The annual APR for 2007 was 13.30% while 2008 saw it dip to 12.08%. Credit card APRs then rose to higher than it was two years previous with an average 13.40% in 2009. The average interest rate climbed higher still in 2010, increasing to 13.78%, then dipped down to 12.74% for 2011.
At 10.66%, the current low interest credit card APR remains lower than any of the averages. The current business credit card APR of 13.40% is higher than most of the averages except for the one seen across the board in 2010. Reward credit card’s current APR of 15.52% was higher than any of the previous averages.
Not Everyone can Get a Low Interest Credit Card
Low interest credit cards may be attractive to everyone, but they are not necessarily available to everyone. Those with a solid credit history and high credit scores may greater access to low interest credit cards based on their reputation for paying off bills on time.
Credit cards that have higher interest rates, such as reward credit cards, typically offer certain perks that may offset the higher interest rate. These may include cash back on certain purchases and airline or travel miles.
One way to avoid paying interest altogether on any type of credit card is to pay attention to the grace period you have for paying your bills. Credit card terms are spelled out in the credit card agreements and they will typically include the length of an interest-free period before the interest rate kicks in, the Federal Reserve explains. This period usually only applies to purchases made with the credit card, not to cash advances.
Steering clear of using your credit card for cash advances and balance transfers may be another way to help avoid paying large amounts of interest. Both transactions may carry the highest interest rates, short of the penalty APR, along with a fee based on the amount of cash you advance or balance you transfer. Paying your bills on time and following the other rules outlined in your credit card agreement may help avoid the penalty APR, which the credit card issuer may keep in place as long as it deems necessary.
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