The interest rates being offered on credit cards have remained steady for weeks without undergoing any changes, despite being high. The average APR on credit cards remained at 14.97 percent for the second straight week. This is the highest average APR that has been reported since 2007. This year, right from the last week of August, the interest rates have either recorded new highs or equaled the highest calculated in the last couple of years.
Cabela’s credit card was the only one that brought about a change in the rate of interest. The higher end of the interest rate offered by this sports retailer on their credit cards was 18.21 percent which has now been changed to 18.23 percent. The lower end of the interest rate on this card remained unchanged at 9.99 percent. Since only the lower range of the interest rates on credit cards is used to calculate the national average, the average APR nationally remained unchanged despite the change in the top end APR of this card. Kevin Werts, the Chief Financial Officer at Cabela, attributed this increase in APR to the changes brought about by Libor (London Interbank Offered Rate) in England. Though most of the interest rates of credit cards in the United States are directly linked to the Federal Reserve’s rates, the rate for Cabela varies based on the changes implemented by Libor.
The national average did not see any change in recent times because banks have been varying the interest rates at the top end of their cards and not making changes to the lower ranges. As a result, the difference between the lower range and the upper range of APRs on credit cards has been seeing a significant increase. The average APR nationally stood at 14.97 percent when the lower ranges of APR were used for calculations. If the same was calculated using the upper ranges being offered by credit cards, the average APR shot up to 20.22 percent. This clearly implies that the current average difference between the lower and upper APR rates is 5.25 percent. The same difference a month and a half ago stood at 5.03 percent.
Unlike what most customers believe, the growing difference between the lower and upper ranges has an impact. The growing disparity between the two ends of the spectrum is not just limited to the regular cards, student credit cards and rewards credit cards also have this growing difference.