Credit Card Rates Stuck At High Level Issuers Haven’t Passed On Savings To Consumers

Credit card holders find themselves on the outside looking in as the bond market celebrates the new year with a powerful rally that has pushed down interest rates on almost everything else.

Standard credit card rates have cruised at an average hovering just below 17 percent for the past two years. But over the past 18 months, the rate on 10-year Treasury bonds has fallen 1.5 percentage points and the rate on 30-year mortgages has dropped 1.36 percentage points. Yields on 30-year Treasury bonds fell to an all-time low Tuesday for a second straight day.

“It’s a bit of a conundrum,” said Bruce Brittain, president of Brittain Associates Inc., a credit-card research firm in Atlanta.

Some credit card rates have even been rising.

When Capital One Financial Corp. wrote to Ronald Morris six weeks ago and offered to raise his Visa credit card limit by $1,000, he was tempted. But he said he quickly tossed the letter when he read that his interest rate would also go up, to 23 percent from 17.5 percent.

“I didn’t think it was possible to pay that,” said the fire safety inspector at a New York office building. “I’m already paying too much.”

Trends in credit card rates typically lag changes in other borrowing rates.

Despite fierce competition in the credit card industry, consumers who shop aggressively can come up short when they start looking for a great credit card rate.

Analysts said one reason for the discrepancy is the competition itself, which has prompted credit card issuers to offer rock-bottom teaser rates and amenities like frequent-flier miles. These are expensive to the issuer, and until the teaser rates expire - usually in six months - seasoned cardholders subsidize the newer ones.

Competition has also caused issuers to give cards to riskier borrowers, which in turn has pushed default and bankruptcy rates higher. Credit card issuers have to charge more to paying customers to make up the losses.