What are the typical credit card rates to expect?

typical credit card ratesWhile most Americans are wondering if our country is indeed beginning to pull out of our most recent recession, there are a few hopeful signs that the economy is beginning to stabilize. One of these indicators is the steady decline of credit card interest rates in recent months.

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Gradually over the last seven or eight months, the average interest rates have fallen for newly issued credit cards. The APR, or average annual percentage rate for all credit cards fell to 14.87%, the lowest rate since June of 2011.

By comparison, the average credit card interest rate reached a record high of 15.22% in December of 2011. While the difference in today’s 14.87% rate may not seem like much, the average consumer would save more than $50 in interest charges when paying off a $5000 card balance.

Lower Interest Rates for Many Types of Credit Cards

According to Fox Business, a division of Fox News, as of February 2012 credit card interest rates reached an eight-month low. Fox’s survey concludes that rates have not increased for 12 straight weeks, a streak unparalleled since the banking crisis began in 2007.

One major international bank that helped spur this trend is Barclays Bank, which announced it would reduce the rates on its Carnival World MasterCard from a range of 13.99% to 20.99% to 10.74 to 21.74%, a reduction on the front end of 3.25%!

credit card rates to expectOther major U.S. banks have begun to follow suit. Overall, interest rates in two major categories of credit cards fell this past week. Interest rates for new balance transfer credit cards dropped to an average of 12.5% from 12.6% just a week earlier, the lowest rate for this category since January2010.

The average interest rates for rewards credit cards, one of the more common types of credit cards in the marketplace, fell to 14.68%, the lowest rate since October 2011. Rates in the other seven main credit card categories remained flat.

At the end of February 2012, the average APR for low interest credit cards was at 10.40%. New credit cards for businesses remained at an average of 13.13% while the average interest rate on student credit cards was a flat 13.77%.

The average annual percentage rate for cash back credit cards remained almost a quarter point lower than rewards cards at 14.45%. The average APR for airline credit cards fell in the middle of the pack, at 14.54%.

Consumers searching online for instant approval credit cards can expect to pay an average of 15.49% for these types of cards, while those with poor credit face monthly average charges of 23.41% when applying for a new credit card.

The Worst May Be Over

Analysts are cautiously optimistic that the worst effects of the consumer credit crunch may slowly be easing. Experts say that the last four years have been anything but normal given the global banking crisis and our own Federal Reserve’s efforts to hold short-term interest rates at record low levels.

Unlike in 2012, credit card interest rates increased dramatically at the beginning of each of the last four years. Rates increased at least twice by the end of February in each of those years. In 2009, there were five rate increases, in 2010 four.

The recent stability in credit card interest rates is just one more indicator that the overall financial markets are improving. Consumers are gaining more confidence in the U.S. economy. Only time will tell if consumer interest rates will continue to drop after reaching record ten year highs in 2011.

It Depends on Who You Ask

According to the Kiplinger report, consumer interest rates should not be expected to increase in the remainder of 2012. Domestic economic growth is expected to range between 2% and 2.3%. While this is significantly greater than the 1.7% growth seen in 2011, the current forecast falls short of the boost need to significantly reduce unemployment.

Kiplinger anticipates that the Federal Reserve will maintain its tight grasp on interest rates and doesn’t forecast any moves until 2013. Inflation is expected to remain low, around 2% for the balance of 2012. Any sharp increase in the consumer price index is most likely to come, once again, from higher energy costs, as the price of crude oil continues to increase.

What we do know is that credit card interest rates are likely to stay at or near their present levels for the near future. The best we can do as consumers is to shop wisely and try not to run up our credit card balances.

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