Credit card companies are refusing to move the needle on credit card interest rates. This week, a credit card survey revealed that the average credit card available on American shores carried a 15% interest rate, no change from previous surveys.
In the last six months, most credit card categories have experienced declines in the interest rate charged to balances. Student card rates have fallen more than half a percent while a select few rewards cards pushed up the average only slightly by less than five basis points.
Credit cards have entered a new stage of competition that is very rewarding to consumers. Rather than fight on fees, though, companies are luring customers with improved rewards. In particular, credit card companies are extending their zero-interest periods to more than a year, making use of low rates to attract potential customers who may wish to consolidate higher interest balances with a balance transfer.
Credit card rates typically follow LIBOR, an interest rate set internationally based on lending between major banking institutions. In the United States, cards may also be based on the Prime rate that is published daily in the Wall Street Journal.
So far it seems as though credit card rates are unlikely to move for quite some time. Following a decision by the Federal Reserve to continue a quantitative easing program to drive down consumer borrowing, interest rates have plummeted for consumer borrowers. The most dramatic effect is felt in short-term financing tools like credit cards, which are the fastest to respond to falling interest rates in the short term.