WASHINGTON—Credit card customers with good credit are seeing their interest rates climb this year, while those with weaker scores are seeing their rates decline.
That is a key finding from CardHub’s Q2 2016 Credit Card Landscape Report which revealed that relative to last quarter, interest rates are rising in the above-average-credit segments of the market, where issuers generate most of their revenue from finance charges.
Rates are trending downward at the other end of the creditworthiness spectrum, where issuers rely more on fee-based revenue, with the “fair credit” segment seeing the biggest drop (3.86%) from the beginning of the year.
“On average, credit card interest rates have increased by 0.24 basis points since December 2015, which exactly matches the Federal Reserve’s 0.25-basis point increase in its target rate,” CardHub stated.
Other Findings
The report also found that not only are interest-free introductory terms 18% longer for balance transfers than new purchases, but they’re followed by a regular APR that is three percentage points lower on average.
“This discrepancy, which began to emerge in Q4 2013, reinforces CardHub’s hypothesis that issuers are more intent on attracting the balances of consumers already mired in debt than incentivizing people to incur new debt in a recovering, yet uncertain economy,” CardHub stated.
The value of initial rewards bonuses offered in the form of points or miles seems to be stabilizing, having declined by 17.25% on a year-over-year basis, but having risen by 6.44% from the first quarter of the year, the report shows.
Turning to fees, the average annual fee fell by 2.26% during the second quarter, posting a 6.33% decrease year over year. It is now $16.43.
Foreign transaction fees continue to fall, declining by 6.82% on a year-over-year basis. At 2.05%, the average foreign transaction fee has now fallen by 19% since the beginning of 2011.
“Credit card companies continue to exploit the weakness of cash-hungry customers, finishing Q2 2016 with a 66% increase in the average cash advance fee since the end of 2012. The average cash advance fee is now the greater of $14.71 or 4.01% of the amount withdrawn,” CardHub said.
For more information on the report, go here.