U.S. bank credit card rates edged down slightly in February, 15 basis points (bps) from the prior month of 13.68%, however the stage is set for substantial rate hikes this year due to anticipated rate hikes by the FOMC in the second half. RAM Research forecasts U.S. bank credit card rates for accounts assessed interest will hit 13.77% at mid-year, then climb to 14.24% by end-of-year (EOY) 2015.
According to the Federal Reserve U.S. bank credit card APRs for all accounts posted 11.98% for February and 13.53% for all accounts accruing interest charges.
Facing the real possibility of one FOMC rate hike in the second quarter and two additional rate hikes in the second half of 2015, U.S. bank credit card rates will likely return to the highest rates in five years.
There is growing consensus the Prime Rate, pegged to more than 80% of U.S cards, will rise to 3.50% in mid Q2/15, 3.75% in early Q3/15 and 4.00% in early Q4/15. Considering the rate passthrough is 30-60 days, U.S. credit card rates will jump by 64 basis points (bps) by year end.
U.S. card issuers will be able to maintain interest spreads as the Prime Rate rises but increasing delinquency and charge-offs may dampen the yield party. Furthermore, consumer pricing sensitivity will likely drive savvy issuers to market fixed rates or variable rates with caps.
U.S. Credit Card APRs for All Accounts
U.S. Credit Card APRs for All Accounts Accruing Interest Charges
Source: Federal Reserve; RAM Research
For data, background and forecasts on U.S. Bank Credit Card Interest Rates: Search CardWeb.com’s CardFlash® Library of more than 58,000 archived articles; Access CardWeb.com’s CardData® for current and historical Performance, Portfolios, Profiles, etc. Visit RAM Research® (ramresearch.com) for quarterly and annual forecasts covering more than 150 metrics. [complimentary or deeply discounted access to CardWeb.com subscribers].
Additional database resources include CardWeb.com’s CardExecs® – comings & goings of payments movers & shakers; CardWeb.com’s CardWatch® – ears & eyes on marketing globally (57K items); and CardWeb.com’s CardPixes® – form & function of card design (7K items).
Interest rates are annual percentage rates (APR) as specified by the Federal Reserve’s Regulation Z. Interest rates for new-car loans and personal loans at commercial banks are simple unweighted averages of each bank’s most common rate charged during the first calendar week of the middle month of each quarter. For credit card accounts, the rate for all accounts is the stated APR averaged across all credit card accounts at all reporting banks. The rate for accounts assessed interest is the annualized ratio of total finance charges at all reporting banks to the total average daily balances against which the finance charges were assessed (excludes accounts for which no finance charges were assessed).