Interest rates on new credit card offers held firm for the
second straight week, according to the CreditCards.com Weekly
Credit Card Rate Report.
The national average annual percentage rate (APR) on new card
offers stood still at 14.98 percent Wednesday, marking the seventh
straight week that interest rates have remained just shy of 15
percent.
None of the cards that CreditCards.com tracks featured rate
changes this week. However, one issuer, Barclays, did make changes
to its rewards card for football fans, the NFL Extra Points Visa
card.
Applicants who successfully apply online for the NFL Visa card
will be able to make purchases with it interest-free for 12
months. However, while dangling the zero-percent carrot, Barclays
also threw a stick: It shortened the card's interest-free balance
transfer period from 15 months to 12 months.
With its zero-percent offer, Barclays joins a crowd of card
issuers that have made long-term 0 percent offers, but have
restricted the terms to a year or less.
Among the 100 cards that CreditCards.com tracks, only 12 cards
feature 0 percent balance transfer offers that run longer than a
year. By contrast, 24 cards feature interest-free offers on balance
transfers for six to 12 months.
There are significantly more cards in the CreditCards.com
database that feature 0 percent promotional offers on purchases.
However, the terms on those types of offers also tend to be more
restrictive.
For example, among the 50 cards that allow customers to make
interest-free purchases for a set period, only nine allow
interest-free purchases for longer than a year.
The majority of credit card offers feature some kind of
teaser rate
Though less ubiquitous than they were a year ago, zero percent
interest promotional rates have remained a common feature among
credit card offers, say analysts at the financial services firm
Credit Suisse, citing Mintel Comperemedia research.
For example, 79 percent of all credit card offers sent through
the mail in July featured a zero percent interest offer on
purchases, according to Mintel research. Slightly fewer offers --
62 percent -- advertised interest-free balance transfer
offers.
Analysts at Credit Suisse say that the percentage of credit card
offers that feature some kind of 0 percent teaser rate is down
slightly from the previous summer. However, researchers expect that
issuers will continue to rely heavily on interest-free offers to
net new customers well into the future. "We expect a high level of
these offers to continue as long as interest rates remain low,"
wrote analysts Meredith Roscoe and Moshe Orenbuch in a
research note referring to long-term teaser rates on purchases.
Issuers can afford to extend such cheap credit for long periods
of time, in part, because borrowing costs for U.S. banks are at
record lows. The Federal Reserve has left the federal funds rate
target -- which helps determine how much it costs banks to lend to
one another as well as to consumers -- at rock bottom for the past
four years.
Policymakers at the Fed don't expect to raise the federal funds
rate target until at least late 2014, which means consumers with
excellent credit can expect relatively cheap credit for some
time.
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