The FOMC’s stunning decision today not to raise rates will be very confusing to card issuers and the stock market. However, credit card issuers are preparing for the certain rate adjustments by year’s end.
U.S. credit card rates will likely return to the highest rates in five years. RAM Research forecasts U.S. bank credit card rates for accounts assessed interest will climb to 14.24% by EOY 2015.
More than 90% of U.S issued bank credit cards are based on the Prime Rate according to CardData.
There is growing consensus the Prime Rate, pegged to more than 80% of U.S cards, will rise to 3.50% in Q3/15, 3.75% in early Q4/15 and 4.00% in in Q1/16. 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
EOY 2009: 13.60%
EOY 2010: 13.44%
EOY 2011: 12.36%
EOY 2012: 11.88%
EOY 2013: 11.85%
EOY 2014: 11.99%
EOY 2015: 12.63%
U.S. Credit Card APRs for All Accounts Accruing Interest Charges
EOY 2009: 14.37%
EOY 2010: 13.67%
EOY 2011: 12.78%
EOY 2012: 12.81%
EOY 2013: 12.89%
EOY 2014: 13.60%
EOY 2015: 14.24%
Source: Federal Reserve; RAM Research
For data, background and forecasts on U.S, Credit Card 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).