Average Interest Rate on New Credit Card Hits 18%

Banking, finance, and taxes

Published: April 8, 2016 11:35 am

Last Updated: January 13, 2020 10:59 am

That seemingly endless stream of offers for new credit cards that shows up in your email or snail mail comes with a catch: the average annual percentage rate (APR) was 2.3% higher in the first quarter of 2016 than it was in the same period a year ago. The biggest hike hit those consumers with only “fair” credit. Since the Federal Reserve raised interest rates by 0.25% in December, the average rate hike on credit cards has been 2.24%.

The data were published on Wednesday by CardHub. The company noted that interest-free introductory terms remain 15% longer for balance transfers than for new purchases, indicating that card issuers want to attract consumers who already have substantial debt rather than appealing to consumers who may want to add to existing debt.

When it comes to reward points or miles, the value of introductory offers dropped by nearly 6% in the first quarter. CardHub suggests this means that some stabilization is occurring. Initial cash-based bonuses did not change quarter over quarter and rose just 1% year over year.

Consumers wanting cash are being hit hardest. The average cash advance fee has risen to the greater of 4% or $14.07. Cash advance fees are up 66% since the end of 2012.

Complaints reached a peak in the first quarter of this year, increasing by 38% overall compared with the fourth quarter of 2015. Billing issues continue to be rack up the most complaints with more than 17% of all complaints. Compared with the fourth quarter of last year, however, billing complaints fell by 0.88%.

The largest sequential percentage increase in complaints was related to fees, up more than 25%, with complaints about the APR up nearly 12.5%. Complaints about customer service dropped by more than 14%, the largest drop in any category.

Among card issuers, the top-rated is the Navy Federal Credit Union with a CardHub satisfaction score of 95.73 (out of 100 possible). USAA Savings ranked second with a score of 93.72, PNC Bank was third with 89.57, followed by BB&T Financial at 87.13 and Fifth Third Bank at 86.46. The next nine spots were taken by the nation’s largest card issuers, including Discover, Capital One and U.S. Bancorp.

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¹https://www.fdic.gov/national-rates-and-rate-caps