Credit card rates have been ticking up at a consistent rate for new credit card holders. Banks and other card issuers are starting to get less skittish about lending to subprime borrowers, however.
New holder rates increasing
Interest rates on the most common forms of credit, such as auto and mortgage loans, have been hovering around record lows for some time, as fewer people are willing to get further indebted and lenders are too skittish to lend to anybody but those with the most pristine credit. However, credit card rates are ticking up in many cases.
According to CNN, the average interest rate for a new credit card holder has risen by one percentage point per year for the past three consecutive years, reaching 14.5 percent recently. Lenders have less leeway with fees thanks to the CARD Act of 2009, meaning they are charging higher introductory rates.
Most card rates trending downward
Despite rates for new card holders climbing higher, other credit card holders are enjoying lower rates. According to MarketWatch, the weekly CreditCards.com rate survey found the national average APR rate was 14.91 percent, down from 14.96 percent a week ago and 14.97 percent six months ago. The rate plummeted over the first quarter of the year; the average APR for all cards was 15.22 percent in December.
All categories of credit cards but three declined by up to 0.5 percent. Student credit cards remained unchanged at 13.77 percent. Airline and reward cards were types with a higher APR from six months ago. Average APR for airline credit cards rose from 14.44 percent six months ago to 14.63 percent and rewards cards rose from 14.61 percent to 14.70 percent.
CardHub.com, according to the New York Times, found the average interest rate for cardholders with excellent credit, interestingly, had risen from 12.46 percent during the first quarter of 2011 to 12.98 percent in the first quarter of this year.
Subprime borrowers getting credit again
According to a New York Times article on MSNBC, credit card issuers are starting to offer cards to people with subprime credit at a faster rate, as are auto loan lenders. In December of 2011, credit rating bureau Equifax noted that 1.1 million credit cards were issued to people with bad credit, a 12.3 percent increase over the number of cards issued to people with subprime credit in December 2010.
Experian similarly noted that 23 percent of new auto loans in the last quarter of calendar 2011 were lent to subprime borrowers, compared to 17 percent in the last quarter of calendar 2009.
The APR for subprime borrowers can be up to 29 percent. The weekly CreditCards.com survey, according to MarketWatch, found an average APR on credit cards for people with bad credit of 23.64 percent, down from 24.96 percent six months ago.