NEW YORK—The U.S. prime lending rate has fallen thanks to easier Fed monetary policy. But the spread between the prime rate and the average annualized rate on credit cards (5.3% and 17%, respectively) widened to a record level at the end of August, a new report reveals.
“Many issuers have been competing for new customers with richer rewards rather than lower rates. They may also be maintaining this record spread because risks are brewing, underscored by a pickup in delinquency rates at smaller issuers of cards,” Bloomberg reported.
Fed data also show a growing gap between delinquency rates for the 100 largest banks compared with all others. Delinquent accounts for the largest banks were at 2.44% in the second quarter, while other banks saw the rate spike to 6.34% from 5.73% the prior quarter, Bloomberg said.