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Average credit card interest rates: Week of January 13, 2021

The average credit card interest rate is 16.05%.

The average minimum credit card APR held firm Wednesday after lenders declined to revise rates on new offers for another week. As a result, borrowers in the market for a new card continued to enjoy starting APRs that are more than a full point lower on average than they were a year ago.

Cardholders with excellent credit are enjoying some of the sharpest rate savings this year. For example, lenders have clipped APRs on some of the most popular rewards cards by at least a point and a half in the past year. For example, the Discover it® Cash Back card currently starts APRs at 11.99%, which is well below the minimum APR most low rates advertise. A year ago, by contrast, it advertised a minimum APR of 13.49%.

Some of the most striking rate decreases have occurred on travel cards, which had surged to record high rates in 2019. For example:

  • In January 2020, the Chase Sapphire Reserve charged an 18.49% minimum APR. Today, it starts APRs at 16.99%.
  • Similarly, APRs on the Citi Premier® Card currently start at 15.99%. A year ago, the lowest APR cardholders could get was 17.49%.
  • The lowest rate Hilton enthusiasts could get on the Hilton Honors American Express Card last winter was 17.24%. Today, the card’s APR starts at 15.74%

As a result, the average rewards card APR has tumbled from 17.11% in the second week of 2020 to 15.76% today, while the average airline card APR has fallen from 16.9% to 15.53%.

As the end to the coronavirus pandemic edges closer, lower rate travel cards could become more attractive to cardholders who are dreaming of a post-pandemic vacation.

Even low interest and balance transfer cards are much less expensive nowadays, giving cardholders who need to carry a balance a temporary reprieve.

Last January, for example, the U.S. Bank Visa Platinum Card and Citi Simplicity® Card both charged a 15.49% APR. Now, borrowers could secure an APR as low as 13.99% on the U.S. Bank Visa Platinum and as low as 14.74% on the City Simplicity. Meanwhile, Bank of America has reintroduced the BankAmericard® credit card after a temporary pause with a minimum APR of 12.99%. A year ago, the best APR cardholders could get was 14.49%.

Most cards received their biggest rate cuts in March and April when the Federal Reserve cut its benchmark interest rate, the federal funds rate, by 1.25 percentage points. When federal interest rates change, most lenders also match the changes on new card offers that are tied to the U.S. Prime Rate.

However, a few lenders have cut rates on select cards by an even larger amount. For example, Wells Fargo cut the APR on the Wells Fargo Rewards® card by five and a half percentage points last year, making it one of the lowest rate cards Wells Fargo offers. Cardholders who qualify could get a rewards card APR as low as 12.49%.

Today’s lower rates won’t last forever, though, since most are due to federal interest rate changes, rather than independent rate strategies.

As soon as the Federal Reserve begins increasing rates, the APRs on all variable rate cards tied to the prime rate will also go up.

It will be a long time, though, before cardholders in good standing will have to worry about higher rates on cards they’ve already opened. The Fed has said it is unlikely to hike rates for at least another year.

See related: How do credit card APRs work?

All information about the U.S. Bank Visa Platinum Card and Citi Simplicity Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. These cards are no longer available through CreditCards.com.

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.05% 16.05% 16.03%
Low interest 12.77% 12.77% 12.83%
Cash back 15.85% 15.85% 16.09%
Balance transfer 13.85% 13.85% 13.93%
Business 13.91% 13.91% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.53% 15.53% 15.48%
Rewards 15.76% 15.76% 15.82%
Instant approval 18.38% 18.38% 18.65%
Bad credit 25.30% 25.30% 24.43%
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: January 13, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com

Congress’ $900B stimulus deal would provide $600 per individual

Congress has passed a $900 billion stimulus package that will include direct payments to most Americans and extend unemployment benefits into the spring. The bill awaits President Donald Trump’s signature, and a new round of stimulus checks could begin to roll out as early as next week.

The legislation also provides protection for the stimulus payments against garnishment by debt collectors. Besides, the payments cannot be used to offset old child support enforcement debts that are owed to state governments. Lauren Saunders, associate director, National Consumer Law Center, a consumer advocacy, noted, “Debt collectors grabbed many of the first stimulus payments, but fortunately it will be hands off for these payments.”

See related: Coronavirus: Credit card issuers offer cardholders relief

New round of stimulus payments, unemployment benefits  

In a Christmas gift for U.S. consumers, the new measure will authorize $600 in direct payments, which is half the $1,200 approved in the first round of stimulus passed earlier this year. There is an income cutoff for the payment, with individuals making up to $75,000 a year and couples making up to $150,000 annually qualifying for the full $600.

Those with dependent children under the age of 16 will also qualify for $600 in payments for each child. As in the previous stimulus round, those above the stated income thresholds will qualify for a lower phased-in payment. In this new round, families in which one person doesn’t have a Social Security number would also qualify for the stimulus payments.

The stimulus also extends unemployment benefits until April and provides a $300 unemployment supplement for 11 weeks. And it extends a program that provides benefits for freelance and gig workers, and contract workers.

See related: Americans would save more of a second stimulus check, study shows

Paycheck Protection Program extended, evictions stayed

The Congressional deal would also extend a moratorium on evictions for a month, The Washington Post reports. After that, it would be up to the new administration to extend it again if it sees fit. And the deal would make for about $25 billion in emergency assistance to renters.

The proposals would grant businesses some relief too, extending the Paycheck Protection Program with $275 billion in funding. Those whose PPP loans are forgiven will also be eligible to have costs that the loans cover deducted on their tax payments if they meet certain criteria.

The Congressional deal had been held up earlier over a disagreement about whether the Fed could initiate new emergency lending programs identical to the ones that Treasury Secretary Steve Mnuchin had declined to extend to next year. The deal would allow the Fed to engage in similar programs, but not identical ones.

Source: creditcards.com

Holiday shopping season off to a slow start in 2020

It’s still early, but thus far the 2020 holiday shopping season is a bust.

The average shopper spent 14% less from Thanksgiving Day through Cyber Monday, compared with the same period in 2019, the National Retail Federation reports. That’s an average of about $312 a piece (versus $362 a year ago).

This year’s online sales broke records, but still fell short of many analysts’ lofty expectations. Black Friday might as well have been Cyber Friday. Americans spent $9 billion online, according to Adobe Analytics, a 22% increase over 2019.

That means Nov. 27, 2020 temporarily claimed the second-biggest single-day e-commerce total in U.S. history (behind Cyber Monday 2019). Three days later, Cyber Monday 2020 blew past them both with $10.8 billion in online sales.

Read more from our credit card experts.

Ask Ted a question.

The problems, at least for retailers, are twofold

First, there were those high hopes. Adobe initially forecast $12.7 billion in Cyber Monday purchases. The other is that in-store traffic plummeted so much that it dragged down the overall totals. The New York Times dubbed it “Bleak Friday.”

The retail tracker Sensormatic Solutions said in-person activity was down 52% the day after Thanksgiving (year-over-year). We knew the COVID-19 pandemic would suppress in-store shopping, but we thought the online totals would be even more impressive.

The National Retail Federation downplayed the Thanksgiving weekend drop.

“As expected, consumers have embraced an earlier start to the holiday shopping season, but many were also prepared to embrace a long-standing tradition of turning out online and in stores over Thanksgiving weekend to make gift purchases for family and friends,” Matthew Shay, the organization’s president and CEO, said in a statement.

See related: How to save money on holiday shopping

We also projected an early start to the season

A late August CreditCards.com survey found a quarter of holiday shoppers intended to begin making purchases by the end of September and nearly half planned to start by Halloween.

It made sense in context: Amazon Prime Day was held Oct. 13-14 (rather than its usual July time slot) and Walmart and Target followed suit with major sales of their own. Yet when the Commerce Department reported the October retail sales figures, they were disappointing. In fact, they barely budged from September and did not meet analysts’ consensus projections.

I think this means one of two things: Either consumers didn’t start as early as they said they would, or if they did, they were very price-sensitive. The latter might be prudent for households but bad for the economy (since consumer spending powers so much of our economic engine). It’s too early to say for sure, but I have a growing suspicion that most holiday shopping forecasts were overly ambitious.

In a projection issued Nov. 23, the National Retail Federation posited that overall holiday sales would rise between 3.6% and 5.2% from 2019 levels. Deloitte submitted their best guess on Sept. 15, a base case of 1% to 1.5% above last year with speculation that the figure could end up a couple of percentage points higher if consumers (especially wealthier individuals) unleashed pent-up demand.

impulse buying? Try making a list before you start shopping, and stick to it. Experts say that if you have a list, you’ll be less likely to stray into the impulse buy zone.

Any increase would be notable given the year it has been

The trough, established back in the spring, was deep. Chase indicated its customers’ credit and debit card spending bottomed on March 30 at a whopping 41% below where it was at the same time in 2019. It has been a mostly steady climb since then. However, after briefly breaking into positive territory for the first time since early March, Chase’s year-over-year gauge nose-dived in late November. Its measure of Black Friday spending fell a precipitous 19% relative to a year prior.

Perhaps the real surprise is that most retail observers were so upbeat in the face of danger. The pandemic continues to rage, setting unpleasant case and hospitalization records with regularity. Some major states and cities are re-implementing lockdown measures in an effort to stem the tide.

The unemployment rate remains elevated, most stimulus programs have waned and there’s no sign that more aid will be coming soon from D.C. We have thankfully seen some breakthroughs on the health front, although widespread vaccine availability is still at least several months away, most health experts suggest.

See related: Consumers would save more of a second stimulus check, study shows

Bottom line

Is it really all that surprising that consumers would be shy to spend freely, particularly if they’re worried about their finances and less able to travel this holiday season? This seems like an entirely rational response.

But rationality has been hard to come by in 2020, as election results are disputed with scant evidence and the stock and housing markets continue to rise almost unabated despite a health crisis of previously unimagined proportions.

It’s going to get better, but we need to get there first. If spending less this holiday season keeps you out of expensive credit card debt, then by all means, that’s what you should do.

Have a question about credit cards? Email me at ted.rossman@creditcards.com and I’d be happy to help.

Source: creditcards.com