Credit Card Interest Rates Go up, up, UP!
Credit card interest rates went up in the second quarter to a nine-year high! The average interest rate on cards climbed to 14.7%, up from 13.1% last year.
This made a wide difference of 11.45 percentage points between the average credit card interest rate and the prime rate. It is the biggest spread seen in 22 years.
The sharp increase in interest rates was due mainly to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. The CARD Act limited the amount of time credit card companies can raise rates. This pressured them to significantly increase interest rates.
Also contributing to the increased rates are the recession and the country's high unemployment. These factors are causing the default rate to go up. There is also more credit card spending, which went up by 6%. But this is below the spending levels of the third quarter of 2008.
With some economic recovery, card issuers have invited more consumers to avail of their credit cards via direct-mail marketing.
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