Fewer credit card companies charging penalty rates

If a person dances with the devil of credit cards, a late payment could mean getting stung with a  penalty rate. Fewer credit card issuers are charging them but those that do are charging more.

Overall credit card rates creeping up

The weekly CreditCards.com survey, which looks at a “basket” of 100 credit cards being offered by various banks and retailers, has found a slight-but-steady uptick in overall credit card rates, according to the Sacramento Bee.

In the past six months, the average credit card rating across all credit cards included in the survey rose from 14.75 percent annualized percentage rate or APR in July, to 15.14 percent APR for the last week of December, when the survey was conducted.

The average interest rate for student and bad credit score credit cards remained unchanged during that time, staying at 13.77 percent and 24.96 percent, respectively. Only instant approval and low-interest credit card rates declined in that period, falling from 15.99 percent and 10.73 percent, respectively, to 15.49 and 10.62 percent APR.

Interest rates for business, reward, cash back and airline credit cards all increased as well.

[Avoid interest when you pay a flat fee for a payday loan cash advance.]

Penalty rates tick up

Penalty interest rates, which are assessed on people whose payments are late, were raised, according to Time magazine. The average penalty rate or default rate increased from 27.9 percent six months ago to 28.5 percent last week.

Last year, the worst individual penalty rate assessed was 32 percent, which was leveraged by HSBC. This year, the highest credit card penalty rate is assessed by Barclays, which administers the Visa Black and LLBean Visa Card, at 30.24 percent APR, according to the Los Angeles Times.

The good news is that penalty interest rates are being assessed by fewer credit card companies. CreditCards.com found that 69 percent of credit card issuers assessed a penalty rate for consumers who made late payments in its survey. At the end of 2010, 91 percent of credit card companies assessed a penalty rate.

Those rates may keep rising

Unlike penalty fees, penalty interest rates are not governed by the Credit Cardholder Accountability Responsibility and Disclosure Act or CARD Act. The CARD Act did mandate that credit card companies wait until the cardholder is at least 60 days behind but didn’t cap the interest rate.

Credit card late fees were capped by the act at $25 for the first offense and $35 for every subsequent offense during a six-month period. Whether credit card companies are going to keep raising penalty rates or more will start charging them remains to be seen.

Sources

Sacramento Bee

Los Angeles Times

Time