Credit card interest rates remain at 15.06 percent

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Average rates on new credit card offers held steady this week, according to the CreditCards.com Weekly Credit Card Rate Report.

The national average annual percentage rate (APR) remained at 15.06 Wednesday after ticking up the previous week for the second time in four weeks. 

This is the 10th week this year that the national average has remained above 15 percent. Average rates began periodically increasing in September after remaining largely unchanged for most of 2013.

On Sept. 4, the national average rose from 14.95 percent to 14.99 percent, then increased to 15.02 percent three weeks later. Since then, the national average has increased three more times over the course of two months.

This year, issuers have raised credit card interest rates more times than they have lowered them. Since Jan. 1, for example, the national average has increased nine times and fallen just five times.

Credit card late payments increase slightly
Despite slightly higher APRs on new card offers, cardholders have managed to stay on top of their bills through most of 2013.  

Late payments on credit cards, for example, fell to record lows earlier this year, according to multiple reports, and are just now starting to creep higher.

Delinquencies (late payments by 90 days or more) rose to 1.36 percent last quarter, according to TransUnion's latest quarterly report, after falling near record lows the previous quarter.

Year-over-year, the national delinquency rate is down significantly from where it was in 2012, according to TransUnion. In the third quarter of 2012, for example, the national delinquency rate hit 1.50 percent. "While consumer credit card delinquencies increased on a quarterly basis, they continued an overall trend of strong performance as evidenced by the yearly decline," said TransUnion's Ezra Becker in a press release .

Late payments are expected to increase again in the final quarter of the year as more people fall behind on payments during the holiday season. However, experts say that generally happens this time of year when people traditionally increase their overall spending.

Credit card balances remain near record lows
Consumers are expected to significantly increase the amount they spend over the next few months as they gear up for the holiday season.

However, new research from TransUnion shows that credit card holders are continuing to be careful about the amount of debt they take on and may not have the appetite to maintain a big balance for long.  

According to TransUnion's latest report, for example, the average credit card holder carried about $5,235 in card debt in the third quarter of 2013 -- $70 less than last year.

In the second quarter of 2013, cardholders carried an average of $5,226 in credit card debt -- just $9 less than they carried the following quarter.

Experts say that cardholders' relatively low levels of debt show that many credit card holders are still chipping away at their balances and are focusing more heavily on getting rid of the debt they have.

"Our data show that consumers continue to deleverage, with balances dropping in the past year and remaining near historical lows," said TransUnion's Ezra Becker in the release.

That could bode well for future card offers, said Becker, since consumers are more attractive customers when they have lower levels of debt. "It appears that, with continued strong credit performance and relatively low debt levels, consumers may be in a strong position to receive more attractive, feature-rich offers from credit card lenders."

However, issuers are still careful about the total amount they lend, said Becker, and aren't approving nearly as many cards for consumers with blemished credit.

According to TransUnion's most recent report, the total number of open credit card accounts increased year over year by about 6.5 million in the third quarter of 2013. The percentage of accounts belonging to consumers with less-than-prime credit scores actually fell this year -- from 29.82 percent of all accounts in the third quarter of 2012 to 29.06 percent in the third quarter of 2013.

"Both the demand for and the supply of credit cards appears to be rising," said Becker in the release. "It's a good trend for consumers and lenders alike, particularly as delinquency rates remain low. Yet despite low delinquency numbers, card lenders have remained cautious in their underwriting, as can be seen by the differences in originations from the recent past in terms of both overall volume and the portion of new cards going to non-prime consumers."

Income growth stalls
Lenders are likely to remain cautious for awhile. The job market has improved significantly in recent months, giving issuers a reason to hope that cardholders' personal finances will continue to improve.

But the amount of income cardholders have to spend has grown slowly and unevenly in recent years and, according to new research from the Commerce Department, income growth actually stalled in some parts of the country in 2012.

According to research released Nov. 21, personal income grew more slowly in 2012 than it did the previous year in the majority of metropolitan areas around the country. More than 300 metropolitan areas saw slower growth in the number of raises handed out in 2012, compared to 2011. Only 65 metropolitan areas saw faster growth.

Overall, consumers living in metropolitan counties had about 4.2 percent more money to spend in 2012. Consumers living in more rural areas brought in about 3.7 percent more money.

See related: NY Fed: Household debt rise marks a turning point , Credit card balances extend their slide



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Credit and Debt

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