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Interest rates on credit cards trending north

[Tuesday, May 8th, 2012]

The prime lending rate for US banks remained unchanged at 3.25% over the last 36 months. However, though there has been no change in the prime rate the interest rates on credit cards have risen steadily over the last few months.

The credit card rates have risen for all types of cards, including non-rewards cards and rewards credit cards. The overall average interest rates on credit cards now stand at 16.99 percent. The average rate of interest for non-rewards consumer credit cards is at 15.03 percent while the average APR for consumer credit cards with rewards is 17.83 percent. The average interest rate on credit cards for students is 17.06 percent. In terms of business credit cards, the average APR for business cards with rewards is 15.53 percent while the average for cards without rewards in this category is 14.74 percent.

The rates of interest for consumer credit cards, for the ones with rewards as well as the ones without them, have increased in the month of February. The good news for business credit card holders is that the interest rates on rewards credit cards have dropped marginally. The rates of interest for most of the student credit cards and non-rewards business credit cards have remained relatively unchanged. Since the trends are varied, the type of rewards offered on the card cannot be considered to be the reason for the increase in interest rates.

But there has been one significant development in the recent past that has increased the rates on credit cards. As per the details available from the United States Energy Information Administration, the prices of crude oil have increased by 8.2 percent over the last one month. Though inflation has been mild, the sudden increase in the crude oil prices can be considered as the triggering factor. With the increase in inflation, credit card lenders are not going to sit back and watch the profit margins dwindling further.

The rate of interest for consumer credit cards without rewards increased by 0.12 percent while the rates of credit cards with rewards increased by 0.10 percent. The combined increased on both credit cards in this category increased the overall average to 16.99 percent. The banks have not made any changes to the lower tier rates. Only the higher tier rates were affected by the change. Therefore, credit card customers with excellent scores continue to remain unaffected by the increase in the annual percentage rates.

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