Average credit card interest rates: Week of February 10, 2021

The average credit card interest rate is 16.12%

The national average credit card APR held steady this week after inching up two weeks in a row. This is the second consecutive week that the average APR for brand-new credit cards has registered 12 basis points above 16%, according to the CreditCards.com Weekly Credit Card Rate Report.

Meanwhile, this is the 46th consecutive week that the average new card APR has remained within rounding distance of 16%.

The average APR is still historically expensive

CreditCards.com has tracked the standard APRs of a representative sample of 100 online card offers every week since mid-2007. 

Currently, APRs on brand-new credit cards are down considerably compared to recent years. For example:

  • The average yearly APR in 2019 was 17.57%.
  • In 2018, it was 16.8%.
  • In 2020, it was 16.32%.

But historically, interest rates on brand new offers are still quite high. For example:

  • In 2017, for example, the average yearly APR stood at 15.89%.
  • In 2016, it was 15.18%.
  • And between 2011 and 2015, it remained stubbornly within rounding distance of 15% every year.

When CreditCards.com first began checking interest rates, by contrast, new card APRs were even lower – in part because lenders had more freedom then to quickly hike cardholders’ APRs once a brand-new card was opened.

For example, the average lender advertised an 11.54% APR in 2008, according to CreditCards.com data. In 2009, the average credit card APR started at 12.34%. But at the time, a cardholder who opened a card with such a low rate was at higher risk than they are today to watch their credit card APRs go up quickly.

The Credit CARD Act of 2009 sought to protect cardholders from surprise rate hikes by requiring lenders to give anyone with an open credit card account at least 45 days’ advance notice before hiking their APR. As a result, lenders appeared to become significantly more cautious about the starting rates they advertised. For example, in 2010, the average card APR climbed from 12.87% in January to 14.68% in December. Average rates then remained near 15% for several consecutive years.

Lenders clearly became more comfortable with revising new card APRs after 2016, though.  When the Federal Reserve revises its benchmark interest rate, most new card APRs change by the same amount.

Lenders also began independently revising card offers more often, particularly between 2017 and early 2020. But the economy soured last spring, prompting the Federal Reserve to slash federal interest rates to near zero. As a result, lenders have become much more reluctant to significantly revise offers.

Majority of lenders appear to be avoiding major changes

None of the lenders tracked by CreditCards.com shook up credit card terms this week. But these days, that’s nothing new. Most credit card issuers have become much slower than they were in recent years to dramatically alter credit card pricing. As a result, many of the most popular credit cards have appeared frozen in time for much of the past year.

Among the 100 cards checked weekly by CreditCards.com, for example, more than 90% of cards currently advertise the exact same APR that they advertised months ago. Meanwhile, a majority of cards included in the weekly rate report haven’t advertised a new credit card APR since last spring.

U.S. Bank has remained the one exception: it has made a number of dramatic rate changes in recent months and has been responsible for most of the rate changes CreditCards.com has recorded since November 2020.

See related: How do credit card APRs work?

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.12% 16.12% 16.03%
Low interest 12.90% 12.90% 12.83%
Cash back 15.94% 15.94% 16.09%
Balance transfer 13.93% 13.93% 13.93%
Business 14.22% 14.22% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.56% 15.56% 15.48%
Rewards 15.81% 15.81% 15.82%
Instant approval 18.47% 18.47% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: February 10, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com

What Is the FICO Resilience Index?

Three young colleagues wearing aprons look at FICO Resilience Index scores on a laptop

By the end of May 2020, more than 40 million people had filed unemployment claims due to COVID-19 and the resulting economic shutdowns. Governments, charities, and even creditors scrambled to put programs in place to support people during this time while also mitigating future economic fallout.

And this isn’t the first time creditors have found themselves working to support borrowers while worrying about their own bottom lines. It’s an issue that occurred during the 2008 recession and one that occurs regionally during national disasters. The new FICO Resilience Index is a tool that creditors might use to help better prepare for times of economic crisis. Find out more about this Index and how it might impact you below.

What Is the FICO Resilience Index?

The FICO Resilience Index is a numeric score each
person is given. The score is supposed to tell creditors how likely a person is
to continue paying their bills as agreed during an economic downturn.

The Index, which is brought to you by the makers of the
popular FICO Score for creditworthiness, ranges from 1 to 99. In contrast to
credit scores, where a higher number is better, a lower FICO Resilience Index score
is better. Here’s how the range breaks down:

  • 1–44: More resilient to changes in economic
    conditions
  • 45–59: Moderately resilient to changes in
    economic conditions
  • 60–69: Sensitive to changes in economic
    conditions
  • 70–99: Very sensitive to changes in economic
    conditions

So, if you have a FICO Resilience Index of 10, it indicates that there’s a good chance that during economic upheaval such as a pandemic or recession, you’re still going to pay your bills on time. If you score a 90, that’s considered much less likely.

How Is the Resilience Index Different from a Credit Score?

A credit score is meant to indicate the likelihood that you will pay your bills on time and as agreed at any time. The Resilience Index rates how sensitive you might be to economic changes and the likelihood that you may be unable to pay bills during a downturn or crisis.

For example, the top factor in your credit score is
whether or not you pay your bills in a timely manner. Your FICO Resilience
Index score is more concerned by your total balance and number of open
accounts. If you balance is high and you have a lot of open accounts, you may
be less able to pay these off during times of crisis.

Here’s what the FICO Resilience Index looks for:

  • Low total balance on revolving credit in comparison to limits
  • A lower number of open, active credit accounts
  • Fewer hard inquiries within the past 12 months
  • A longer credit age, which indicates more experience managing credit

You can improve your FICO Resilience Index by reducing hard inquiries and not opening new credit accounts unless they’re necessary. But the index relies heaviest on credit utilization. Keeping your credit card and other revolving account balances as low as possible can improve your index score.

Does the FICO Resilience Index Matter to You?

As of mid-2020, the FICO Resilience Index is new, and
not a lot of organizations have integrated it into their lending processes yet.
In the beginning, it might not be especially relevant to consumers. However, as
organizations start to integrate it, there’s a good chance creditors may
consider both your credit score and your resilience number when approving—or
denying—your application.

Where Can You See Your FICO Resilience Index?

To have a FICO Resilience Index score, you must have at least one account that was reported to the credit bureau in question in the past 6 months. You must also have at least one account that is at least six months old.

As of July 2020, the FICO Resilience Index is being
provided in pilot testing to lenders. FICO is partnering with Equifax and
Experian to include the index alongside credit scores when lenders conduct a
hard credit inquiry. As of July 2020, the index scores were not yet made
available to consumers.

Does This New Number Make Credit Scores Less Important?

The FICO Resilience Index doesn’t reduce the importance
of your credit score. Lenders are still concerned with whether or not someone
is a “good risk.” Even with a strong resilience number, you may find yourself
getting turned down for loans or credit cards if you have a poor credit score.

You can’t check your FICO Resilience Index number at this time. But you can check your credit report and scores and make good financial decisions. In many cases, what’s good for your credit score is also good for your Resilience Index. Start today by signing up for Credit.com’s Credit Report Card or ExtraCredit. ExtraCredit offers 28 of your FICO scores for review, and they’re updated regularly—helping you stay on top of your credit trends.

Sign Up Now

The post What Is the FICO Resilience Index? appeared first on Credit.com.

Source: credit.com

Apple Card temporarily offering $50 sign-up bonus for Exxon Mobil purchases

Many rewards credit cards offer the opportunity to earn a sign-up bonus. Even some no-annual-fee credit cards offer them, allowing consumers to maximize cash back or points without paying every year for simply having the card.

The Apple Card only started offering a sign-up bonus in June, when Apple cardholders could earn $50 in Daily Cash after spending $50 at Walgreens. This was followed by offers in September, October and November, most recently including a $75 sign-up bonus after spending $75 at Nike in-store and online via Apple Pay.

And now through Jan. 31, new Apple Card holders can score a slightly lower sign-up bonus. You’ll get $50 in Daily Cash after you spend $50 or more on purchases with Exxon or Mobil.

See related: Apple Card: One year later

How to get the Apple Card sign-up bonus

New Apple Card holders who open an account between Jan. 8 and Jan. 31, 2021 can earn $50 in Apple’s Daily Cash when they spend $50 using Apple Card with Apple Pay (where available) at Exxon and Mobil stations at the pump or at attached convenience stores in the U.S., within 30 days of the account opening. To pay at the pump with Apple Pay, you can use either the Exxon Mobil Rewards+ mobile app or contactless payment.

This month’s sign-up bonus from Apple is lower than its previous offer from Nike, but on par with the older offers from Walgreens and Panera Bread, both of which got you just $50 in Daily Cash back after a matching spend.

You can apply for the Apple Card from the Wallet app on your iPhone.

Should you apply for the Apple Card now?

If you have been considering applying for the Apple Card, it might be a good idea to do so this month, especially if you commute or drive often enough to spend $50 at gas stations in a month. While the card doesn’t always come with a sign-up bonus, new cardholders currently have a great chance to earn one.

Besides that, the Apple Card offers 3% cash back on Apple purchases, as well as 3% cash back when you use Apple Pay for Walgreens, Nike and Uber and Uber Eats purchases and at T-Mobile stores. Other Apple Pay purchases will earn you 2% in cash back. When you use the physical card, the cash back rate goes down to 1%.

However, the Apple Card might not make sense for everyone. The earning rate is good on Apple purchases, but if you’re looking for a primary cash back card to add to your wallet, there might be better options.

For example, with the Blue Cash Everyday® Card from American Express you can earn 3% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%) and 2% cash back at U.S. gas stations and select U.S. department stores. All other purchases will get you 1% in cash back.

Another alternative is the Capital One Quicksilver Cash Rewards Credit Card, which earns you unlimited 1.5% cash back on every purchase and doesn’t have an annual fee. Plus, you only need to spend $500 in the first three months with the card to earn its $200 sign-up bonus.

There are quite a few other cards to look into. Shop around before you decide to take advantage of Apple’s offer. The sign-up bonus alone shouldn’t tempt you into signing up for a card that doesn’t align with your spending.

See related: Apple card credit score requirements and reasons for denial

Final thoughts

If you’re an Apple enthusiast and have been looking into the Apple Card for some time, now might be a good time to apply. The new limited-time sign-up offer gives you an opportunity to earn an easy sign-up bonus – something the card doesn’t normally have.

Source: creditcards.com

Credit card industry trends to watch for in 2021

Each year, CreditCards.com asks the experts to predict what the credit card landscape will be like in the coming year.

Read industry gurus’ forecasts now and see what changes credit card issuers might have in store for 2021.

See related: Best credit cards of 2021

More flexibility in card offers

Steven Dashiell, credit cards expert for Finder, expects the exceptional welcome offers and expanded reward opportunities we saw throughout 2020 will continue into 2021.

“These card adjustments were a response to evolving consumer spending habits during the pandemic and I foresee these spending habits lasting well through 2021,” Dashiell said.

Nishank Khanna, chief financial offer for Clarify Capital, noted that consumers are spending more on essential goods than discretionary items, so credit cards will likely offer more benefits for groceries and home goods.

“We can expect to continue to see flexibility with card offers, with many card issuers providing cash back options and diverse opportunities for the cardholder to decide how she or he spends rewards,” Khanna said.

This move is especially important for consumers who are exploring the perks they can get as they battle the impact of lockdowns and travel restrictions.

‘Buy now, pay later’ options will be more in demand

Given the current financial climate, consumers have gravitated toward alternative payment methods such as buy now, pay later options, said Imani Francies, a financial expert at USInsuranceAgents.com.

These services allow consumers to make large purchases by paying only a percentage of the total cart amount – they are then expected to make biweekly or bimonthly payments until the entirety of the purchase amount is paid off.

But Francies warned that if this way of paying becomes too addicting, people may start using credit cards to keep up with their payment plans, which could hurt their credit scores and transform the buy now, pay later option into a negative experience.

contactless payment technologies, said Vince Granziani, CEO of IDEX Biometrics.

For example, biometric fingerprint technology allows the user to make touchless payments via a fingerprint stored on a credit card that is safe, secure and unique to that individual.

The global demand for biometric technology in the payments industry is robust and will accelerate as business returns to a new normal in 2021 and beyond, Granziani predicted.

In 2021 and beyond, biometric smart cards will also become increasingly necessary to combat payment fraud. These cards prevent hackers from stealing your PIN or fingerprint data since it’s all stored directly on your card.

Therefore, if anyone were to steal or attempt using your card, they couldn’t do it without your fingerprint to activate a transaction, Granziani said.

Biometric cards have multiple uses, capable of holding passports and driver’s licenses ­– even library cards and travel passes – while holding your payment details all in one place, he added.

See related: Credit card scams in the time of coronavirus

Increased transparency will be the name of the game

Charles Tran, founder of CreditDonkey, forecast that credit card companies will offer increased transparency in 2021.

Transparency has always been a significant factor in the financial industry and it’s becoming an essential point of focus considering the tough times we are in, so credit cards will have to offer simplicity and utility to stand out.

“This will include transparency in the reward systems, fewer hidden fees, complimentary credit score monitoring and easier rewards redemption,” Tran added.

See related: 2020 credit card fee survey – What happened to 0% balance transfer offers?

Issuers may get tougher on delinquent debtors

Adem Selita, CEO and co-founder of The Debt Relief Company, sees an unsettling trend happening with regard to cross-collateralization, a method lenders use to secure one type of loan with the collateral from another.

For example, if you bought a car from a credit union and didn’t keep up with the payments, the credit union could repossess the car to satisfy your loan.

Selita believes credit card companies will become more aggressive regarding credit card defaults – depending on how the economy unfolds in the intermediate term – and even add features like collateralization to use consumers’ funds to pay their delinquent credit card bills.

In addition, Selita said, an updated law that goes into effect in 2021 will allow debt collectors to contact debtors via social media channels, text and voicemail.

And although they are not allowed to use social media to harass debtors, Selita said it still amounts to “essentially stalking consumers behind on their credit card bills and in default.”

2021 will be a comeback year for credit cards

There will still be some pain in terms of delinquencies and difficulty accessing credit, but 2021 will be a comeback year for credit cards, according to Ted Rossman, industry analyst for CreditCards.com.

The news of an effective COVID vaccine bodes well for a return to travel, dining and other discretionary spending that is so important for credit card companies.

But the improvement won’t be immediate or evenly distributed, Rossman warned.

Unfortunately, many consumers will fall behind on their payments, especially as stimulus and hardship programs wear off.

Many banks are expecting delinquencies to peak around mid-2021, although there’s still a fair amount of uncertainty around that.

This trend should keep a lid on 0% balance transfers and access to credit for people with lower credit scores, but the rebound will mean more competition for people with high credit scores and incomes, Rossman predicted.

“We’re already seeing some of this with the recent Capital One Venture Rewards Credit Card bonuses, and in 2021 I think we’ll see even hotter competition for the most creditworthy applicants.” he said.

Start your journey to financial freedom

Whatever might happen in the credit card industry in 2021, if you and manage your credit well you will stay financially healthy.

Spend wisely, avoid opening new credit you don’t need, manage your existing debt and live within your means, and you’ll be on the road to financial freedom.

See related: Overcoming hardships by embracing financial independence

Source: creditcards.com