Credit card interest rates remain near record highs

Credit card interest rates on new card offers were unchanged this week, lingering near record highs.

Theaverage annual percentage rate (APR) on new credit card offers held steady at 14.73percent, according to Weekly Rate Report -- just shy of the record 14.78 percent reached in November.

None ofthe issuers that tracks made APR moves this week, marking thesixth time in 11 weeks that the national average has remained unchanged. Duringthat period, the national average has declined only once and has risen fourtimes, though each rise has been statistically small.

Thisnotable stickiness in average APR rates is a significant departure from earlieryears when weekly changes to the national average were often more fluid. Accordingto data, average APRs haven't risen by more than a tenth of apercentage point in the past 16 weeks. However, they also haven't dipped by that amount in the past 10 weeks. Contrast that to early 2010, when thenational average shot up nearly 2 full percentage points -- from 12.87 percent to14.62 -- in just eight weeks leading up to enactment of major provisions of theCredit CARD Act.

Cardissuers have appeared reluctant in recent weeks to make any changes to theirAPRs on new card offers. Among the more than 30 card issuersthat tracks, only four banks -- Barclays, Chase, Citi and StateFarm -- have made changes to standard purchase APRs for new card offers since the beginning of the NewYear.

Why the lack of movement?Experts say that issuers' hesitancy to make major changes to their card offersand return APRs to historical norms stems, at least in part, from banks' continued anxiety toward federalregulations. This month marks the one-year anniversary of major provisionsof the Credit CARD Act taking effect. According to CreditCards.comdata, interest rates shot up to record highs around the same time -- topping 14percent for the first time since began tracking rates inmid-2007.

Issuersargue that they are burdened by the CARD Act's regulations and, as a result,their ability to turn a profit now hinges on tighter credit card offers,including those with higher rates. Many banks began increasing rates shortlybefore major provisions of the Credit CARD Act took effect and, according data, the moves were historic. In 2008 and 2009, credit card APRs hovered between 11 percent and 13 percent, topping the latter number only rarely. However, on Feb. 3, 2010, just threeweeks before the regulations became active, the national average for new cardoffers shot up nearly 1 percentage point to 14.12 percent -- a record high atthe time. The national average hasn't dipped below 14 percent since, and banksshow no signs of bringing interest rates back down in the near future.

Meanwhile,the Boston Consulting Group released a report Tuesday that may stoke banks' fearsabout federal regulations even further. Theauthors of the report point to lost revenues that banks have sustained sincethe CARD Act took effect and warn that if banks don't significantly retooltheir business models, they will continue to see record profit losses in thefuture.

"Thecredit card business continues to be plagued by above-average charge-offs, theeffects of the CARD Act and shifts in consumer behavior," the authors write."Unfortunately, better days do not seem to be near. Although the level ofcharge-offs is declining slowly, persistently high unemployment ... will hinderrapid improvement. In addition, the impact of the CARD Act is expected to belong lasting, which will intensify competition for a shrinking group ofattractive customers."

Inthe report, the authors forecast a dire future for banks in which credit card issuers'profits are battered by new and existing credit card regulations. The authorspredict that increased regulation, including the Credit CARD Act, will soon cost the credit cardindustry a whopping $25 billion in annual revenue.

Thegroup's ominous forecast appeared just a day after the Federal Reserve reportedthat consumer credit card debt rose in December for the first time in more than two years, indicating that American cardholders are regaining their appetite for creditin spite of the record high rates.

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