Credit card interest rates held steady this week, ending a two-week run of decreases that brought APRs down from record levels. The average annual percentage rate (APR) on new credit card offers stayed at 14.88 percent this week, according to the CreditCards.com Weekly Rate Report. It's a break in what has proven to be a volatile two-month period that has seen rates climb to a record high of 14.91 percent in early July, followed by the first back-to-back weekly declines in the average since March. Still, that volatility has been unusual for 2011, which saw rates stay mostly stable for the first half of the year. This week marks the 14th time in 2011 that there has been no week-to-week change in APRs on new credit card offers. At this point in 2010, that had only happened four times. However, now that most of the Credit CARD Act of 2009's provisions have been in effect for more than a year, banks and creditors are no longer scrambling to revise their programs to adjust to the new laws. The one rate change we saw this week came from sporting goods retailer Cabela's. The top end of the APR range for the Cabela's Club Visa card dropped from 18.25 percent to 18.18 percent, while the low end remained at 9.99 percent. Since only the low ends of APR ranges are used to calculate the national average, Cabela's move didn't affect it. Cabela's Chief Financial Officer Kevin Werts said the move was due to a change to the London Interbank Offered Rate, or Libor, the British equivalent of the U.S. federal funds rate. When Libor moves, the Cabela's card's APR -- and the APRs of all other variable rate credit cards tied to Libor - move by the same amount in the same direction. While most U.S. variable rate credit cards are tied to the prime rate in the U.S. -- which moves based on changes to the Federal Reserve's federal funds rate -- the Cabela's card is tied to Libor.
And while the Federal Reserve hasn't changed the federal funds rate since 2008 and isn't expected to do so anytime soon, there may be other reasons to be concerned about a future hike in credit card APRs. The agreement between President Obama and Congressional leaders to raise the debt ceiling kept the nation from defaulting on its debts, but may not be enough to keep the nation's credit rating from being slashed. If that happens, experts say, higher APRs for credit card offers would likely follow. After a long, contentious debate, President Obama signed the Budget Control Act into law on Tuesday. Since then, two of the three major credit ratings agencies - Moody's Investor's Service and Fitch Ratings - announced that they would leave the nation's credit rating at AAA, the highest possible. However, Standard & Poor's, the third agency, hadn't announced whether it would keep the nation's rating steady or lower it. Why does this matter? A credit rating tumble could drive up interest rates for goods and services -- and credit cards. That's because, generally, if the U.S. government is seen as being a big risk, it tends to make most other investments seem riskier as well. Thus, banks would likely increase rates on credit cards, mortgages and more, in order to guard their profits against that increased risk. And while they chose not to downgrade the credit rating this time, calling the agreement "a first step toward achieving the long-term fiscal consolidation needed" to keep the nation's AAA rating, Moody's outlook wasn't entirely positive. They warned that, for example, a "weakening of fiscal discipline" or a "deteriorating" economy in the next year could lead to a future downgrade.