From MarketWatch
This is the interest rate you should care about
By Chuck Jaffe
Published: Sept 12, 2014
For all of the talk about how low interest rates are and how long they will stay low, Americans have mostly missed the fact that the interest rate that may be most important to them isn’t low at all.
BankRate.com this week pegged the average variable credit-card interest rate at 15.66%, the highest level since it started surveying variable rates in 2005. Variable card rates didn’t burst through the old record with some big jump, they simply continued inching up, continuing a slow, inexorable trend that started with the passage of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
The timing of the new highs could not be much worse for consumers. Americans added $28.2 billion to their credit card balances during the second quarter of 2014, the largest quarterly amount in the last six years, according to CardHub.com. That debt expansion nearly erased the $32.5 billion that consumers paid off during the year’s first quarter.
With the average credit-card debt per U.S. adult — excluding zero-balance cards and store cards — now standing at just under $5,000, according to TransUnion, and with the Federal Reserve saying there’s nearly $900 billion in outstanding revolving debt and well over $3 trillion in outstanding consumer debt, little moves up in credit-card rates add up. The average household credit-card balance has fallen from nearly $8,500 around the time of the financial crisis in 2008 to about $6,800 today.
While most consumers haven’t necessarily noticed the rate creep because it has been so gradual, the situation causing the increase also should guide consumers on how they might respond to it, because it’s harder to evade high rates now than it was in the past.
One facet of the CARD Act is that it prevents card issuers from raising rates on an existing balance until the cardholder becomes 60-days delinquent.
Before that provision was put into place, consumers faced a landscape where the moment a payment was late, the card issuer would jack up rates. Thus, a consumer who signed on for a deal at, say, 9%, would come up a day late and see their tariff double to 18%, a steep price to pay.
Read more from MarketWatch >>
This is the interest rate you should care about
By Chuck Jaffe
Published: Sept 12, 2014
For all of the talk about how low interest rates are and how long they will stay low, Americans have mostly missed the fact that the interest rate that may be most important to them isn’t low at all.
BankRate.com this week pegged the average variable credit-card interest rate at 15.66%, the highest level since it started surveying variable rates in 2005. Variable card rates didn’t burst through the old record with some big jump, they simply continued inching up, continuing a slow, inexorable trend that started with the passage of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
The timing of the new highs could not be much worse for consumers. Americans added $28.2 billion to their credit card balances during the second quarter of 2014, the largest quarterly amount in the last six years, according to CardHub.com. That debt expansion nearly erased the $32.5 billion that consumers paid off during the year’s first quarter.
With the average credit-card debt per U.S. adult — excluding zero-balance cards and store cards — now standing at just under $5,000, according to TransUnion, and with the Federal Reserve saying there’s nearly $900 billion in outstanding revolving debt and well over $3 trillion in outstanding consumer debt, little moves up in credit-card rates add up. The average household credit-card balance has fallen from nearly $8,500 around the time of the financial crisis in 2008 to about $6,800 today.
While most consumers haven’t necessarily noticed the rate creep because it has been so gradual, the situation causing the increase also should guide consumers on how they might respond to it, because it’s harder to evade high rates now than it was in the past.
One facet of the CARD Act is that it prevents card issuers from raising rates on an existing balance until the cardholder becomes 60-days delinquent.
Before that provision was put into place, consumers faced a landscape where the moment a payment was late, the card issuer would jack up rates. Thus, a consumer who signed on for a deal at, say, 9%, would come up a day late and see their tariff double to 18%, a steep price to pay.
Read more from MarketWatch >>
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