Janet Yellen, where are you? Ben Bernanke, we miss you too. Interest is climbing and consumers will miss the days gone by with locked interest rates as the WSJ reports a 100% survey expectation that we will see another rate hike in 2018. More than half expect at least 3 increases in 2019..
As the Federal Reserve Chairman, Jerome Powell, continues his promise to gracefully raise interest rates, consumers should be on the look out for introductory offers as this story in MarketWatch suggests.
- ’Zero-percent offers still exist. Anyone with credit card debt should jump on them’
- The national average minimum annual percentage rate (APR) for credit cards was 17.07% on Wednesday, up from 17.01% a week earlier, according to a report from CreditCards.com. A year ago, the average minimum interest rate was nearly a full percentage-point lower at 16.15%.
- Similarly, the average maximum APR charged by credit-cards issuers is now 24.44%, up from 24.39% last week. The increases are a direct reflection of the Federal Reserve’s move to raise interest rates for the third time this year in late September, said Ted Rossman, industry analyst for CreditCards.com.
With virtually all credit cards pegged to the prime, risking rates are merely a pass-through to consumers; issuers are protected from interest rate risk.
- The APR that credit-card issuers charge is calculated using the benchmark prime rate, which is itself based on the federal funds rate set by the U.S. Federal Reserve. With the Fed signaling that more interest-rate hikes are to come, including one possibly in December, credit-card rates are likely to continue moving higher.
- That’s no relief to many consumers though. “As high as 18% sounds, some people are already paying considerably more than that,” Rossman said. The average APR for credit cards geared for consumers with poor credit is 24.30%. Credit cards offered by retailer can offer rates at or above 30%.
There are plenty of good offers available that give consumers 0% rates for a period through top issuers such as American Express, Bank of America, Capital One, Chase, Citi and Discover. It is a good time for issuers to take a look at their household expenses and get in front of the rising rate issue. For issuers, it is time to look at your offers and align balance transfers and intro offers to ensure your offer meets the best in the market.
S/he who hesitates is lost!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group