Average credit card interest up to shocking 21%
Credit card companies know there’s no free lunch, but they’re letting more customers get a taste as an enticement by gouging their existing card members.
The average credit card interest rate for people with fair credit has hit a shocking 21 percent, up more than 2 percent from only a year ago, according to industry group CardHub.
Credit card companies, which attract new customers with zero percent teaser rates and more rewards, have raised rates while their costs remain historically low, industry observers say.
“Credit card interest rates were higher across the board during the first three months of 2014 relative to the same period last year,” according to CardHub’s Landscape report. The report said the increase was roughly 2.12 percentage points on a year-to-year basis.
Another rising and unsettling trend: More strapped consumers are taking pricey cash advance deals, a CardHub official warns.
These customers are forgetting the credit card woes of 2008, when delinquency rates rose because, as card companies stopped offering cheap deals, many consumers were stuck with high-interest card debts, he says.
Indeed, some consumers aren’t considering that long-term effect of teaser rates, CardHub CEO Odysseas Papadimitriou warned.
He says this is part of a strategy by card issuers to increase profit margins by borrowing at near zero rates and then charging customers 21 percent interest instead of 18 percent.