We’ve started 2012 on a troubling financial note: credit card interest rates are hovering near record highs.
Two weeks ago, the average APR soared above previous records, hitting an average of 15.22%, about a quarter of a percentage point higher than the previous record set back in September. With credit card companies increasingly targeting riskier customers to rebuild market share lost during the recession, this could mean big bills for people who are less well-equipped to manage them.
According to CreditCards.com, which tallied the rates, “The drop comes a week after the biggest one-week increase of the year sent the average to unprecedented heights.”
As TIME Moneyland pointed out back then, issuing banks were blaming the implementation of the Credit CARD Act of 2009 for the rate-creep. But it’s not as if lawmakers write bills that mandate higher rates. In fact, CARD Act authors specifically decided against capping the rates issuers can charge, over the objections of some consumer advocates.
The big difference is that the law put new limits on the circumstances under which credit card companies can raise APRs, leading companies to essentially charge higher interest at the outset.
In the past six months, average APRs for cash back, rewards and airline cards have also risen, with cash back and rewards cards both hovering around 14.9% interest, on average, and airline cards at roughly 14.5%. Issuers are also charging an average of a quarter of a percentage point more for balance transfer cards, with a current average of 13%.
Offering low or 0% balance transfer APRs for several months is hugely popular right now among credit card companies, but this rate-creep is risky for consumers who don’t manage to pay off that transferred balance within the “teaser rate” period.