Credit Card Rates Highest Since 2001

Yesterday, the latest set of new credit card rules went into effect. Among other things, they ban inactivity fees and limit credit card late fees to $25.

While it’s seemingly good news for consumers, the rules will clearly cost credit card issuers dearly.

And in an effort to offset those losses, interest rates on credit cards have been rising steadily.

So much so that they’re now at their highest point since 2001, according to research firm Synovate.

During the second quarter of the year, the average interest rate on existing credit cards climbed to 14.7%, up from 13.1% a year ago.

At the same time, the prime rate, which is used as a benchmark to price credit card interest rates, has fallen precipitously.

It now stands at just 3.25%, having fallen from 8.25% as recently as mid-2006.

The spread between the prime rate and average credit card rates is now at 11.45%, the highest in at least 22 years, which is as far back as the Synovate data goes.

Strange, considering other consumer loans like mortgages are at record lows, though much of that has to do with government involvement.

So the plan for credit card issuers going forward is to make more money via finance charges, all the more reason to pay down your balance in full each month.

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