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Shocker: Average credit card interest climbs to 21%

Published time: April 21, 2014 18:41
Edited time: April 22, 2014 09:14
Reuters/Jim Bourg

Reuters/Jim Bourg

As credit card companies try and spur consumer spending in the United States with introductory perks and cash rewards, they have raised interest rates on other customers to a remarkable 21 percent.

According to a new report by the card-comparison website CardHub, credit card interest rates have risen more than 2 percent compared to one year ago, due in part to the fact that companies are using zero-percent introductory rates to lure in customers before imposing much higher rates after that initial period ends.

“Credit card interest rates were higher across the board during the first three months of 2014 relative to the same period last year –rising an average of 2.12% on a year-over-year basis,” CardHub’s Landscape report stated.

In addition to rising interest rates, more Americans are taking out cash advance loans that are attached to increasingly expensive fees.

“The average cash advance fee increased more than 10% in Q1, rising to $12.31,” CardHub stated. “Issuers have displayed the ability to increase cash advance fees with impunity, as consumers don’t tend to factor such costs into their comparison shopping. These dynamics are reminiscent of when past-due and over-limit fees were allowed to get out of hand prior to the CARD Act’s implementation.”

While interest rates rise, the average initial period offering zero-percent interest has increased by 10 percent over 2013, and cash-back rewards rose about 15 percent as well.

Speaking to the New York Post, a CardHub official stated the situation looks similar to the credit crisis of 2008, when consumers ended up with high-interest debts after companies stopped offering upfront rewards and cheaper deals.

“I think credit card companies are essentially realizing that consumers are more focused on introductory rates,” CardHub CEO Odysseas Papadimitriou said. “So they are not paying much attention to what happens after the introductory rates.”

He added that a three-percent increase in rates “doesn’t seem like much, but in relative terms, that really adds up over the long term.”

At the same time, Bloomberg Businessweek reported that thirty-day delinquency rates for credit cards from major companies like Chase and Bank of America are down 19 percent compared to a year ago, suggesting Americans are managing their debts more effectively.

Another reason that could account for lower credit card use is potential fear over identity fraud. Bloomberg noted that cases such as Target’s security breach – which saw about 100 million peoples’ data stolen by hackers – could make Americans less likely to spend. CardHub’s report stated that complaints about identity theft and fraud were up 61 percent over last year.

Comments (28)

 

mergon 17.06.2014 10:11

I learnt my lesson early with credit cards in a time when we had no problem with getting a job i used the card and used to pay £100 a month regardless but at the end of the day you have to look at the interest and the interest rate rises
if your not careful the interest will overtake you, in the UK
a Visa card will cost you 30% thats a lot of money and they pay themselves big bonuses ,pay your cards off and only use them in an emergency and be careful with them the system is crashing dont accumelate debt !

 

rdider 22.04.2014 23:02

Annie Libya Hathor 22.04.2014 04:15

Many comments seem to reveal the brainwashing that says this is the fault of how people use their credit cards.

NO! The PROBLEM is the tyrannical banks who have paid for legislation that even allows this criminal usury.

  




[/quote]


Tyrannica l banks?? No one is holding a gun to your head when making the purchases. You are knowingly and essentially making a contract with the issuing bank that you will pay them back for fronting you the money and will be charged interest if the principal isn't paid back in time.

 

Kyle 22.04.2014 13:09

The biggest and best thing we can do to take the wind out of the sails of the 1%ers is to stop using credit cards whenever it is in any way possible. They have been spending millions on ads to get the consumerist population to pay for absolutely everything with a card. That way, they get a cut out of absolutely everything we buy & sell. Everything! My credit cards are all paid off, and I use only cash or checks to pay for anything I buy except for internet purchases which I keep to a minimum. I switched my bank accounts to a Credit Union and told the big banks to kiss my a$$.

View all comments (28)
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