Credit card interest rates unchanged as 2010 draws to a close

Credit card interest rates remained unchanged this week, asbanks wrapped up a turbulent year in which interest rates reached record highs.

The national average annual percentage rate (APR) on new credit card offersremained at 14.68 percent this week following the Christmas holiday, accordingto's Weekly Rate Report.

Ourweekly examination of terms and conditions for 100 of the most popular cards inthe nation showed no APR changes this week, making it the third week in thepast five in which banks left rates unchanged.

A costly yearInterest rates have been fitfully moving up since January, making this a costlyyear for credit card holders. As banks adjusted interest rates throughout 2010,amid anemic job growth and new regulations from the Credit CARD Act of 2009,cardholders saw interest rates rise nearly 2 percentage points over thecourse of the year. On Jan. 1, 2010, the average rate for new card offers was12.97 percent -- the lowest APR recorded in 2010. Throughoutthe rest of the year, saw a flurry of activity as banksexperimented with new rates:

  • On Nov. 8, 2010, the national average hit 14.78 percent, the highest APR that has seen since we began tracking APR rates in 2007.
  • On Feb. 3, 2010, the national average rose from 13.17 percent to 14.12 percent, setting off a record-setting trend in which interest rates remained stubbornly high. The national average APR for new credit card offers hasn't dropped below 14 percent since.
  • Over the course of the year, the national average rose 23 weeks, declined 18 weeks and remained unchanged 11 weeks.

As a result of all this activity, the averagecardholder paid more in interest in 2010 than at any time since CreditCards.combegan tracking rates in 2007. For example, a typical cardholder who borrowed$5,000 on a credit card today and paid $150 monthly at today's average APRwould have to spend $229 more to pay off the balance than would have beenrequired when 2010 began. (Calculator: How long will it take to pay off your credit card balance?)

Data: Most cardholders are keeping upIn spite of the changes, most cardholders appear tohave kept up with this year's ballooning interest rates. In a report releasedlast week, Moody's Investors Service announced that the national delinquencyrate for credit card accounts that are at least 30 days late dropped for the 13thconsecutive month in November and the charge-off rate for accounts that issuersdeemed uncollectable also dropped in November for the fourth month in a row. Analystsat Moody's said they expect that cardholders' ability to payat least the minimum amount on their credit card bills will continue to improvein 2011 -- that's good news for struggling cardholders who can't afford a lowercredit rating.

This doesn't mean, however, that the average cardholders are finding it easier to pay off their balances. Moody's also reported that the number of cardholders who paid off large chunksof their credit card balances stayed relatively static last month, continuing anuneven year in which the payment rate improved substantially for most of 2010and then leveled off in the fall.

Paying more than the minimum amount due is animportant tool for consumers who are combating rising interest rates. However,this cardinal rule of money management is even more important in today's creditcard climate when interest rates are at record highs. Using the earlier exampleof someone with $5,000 in credit card debt, the cost of paying just the minimumrather than a larger regular payment -- say $150 per month -- would be several thousanddollars and several more years in debt.

The overall forecast for 2011 remainscloudyAs consumers head into 2011, traditional bellwethers used to forecast economicgrowth are giving mixed signals about the months ahead. In its annual holidaywrap-up report, SpendingPulse announced that holiday spending grew 5.5 percentthis year, higher than many analysts expected.

However, as retailers cheer and tally up theirprofits, consumers remain glum. The Conference Board reported on Dec. 28, that,in spite of the encouraging sales figures, consumer confidence slipped inDecember as more Americans remain pessimistic about the country's weak jobmarket.

According toLynn Franco, Director of the Conference Board's Consumer Research Center,consumer confidence is about the same as it was last year when the jobsforecast appeared equally gloomy. "Consumers' assessment of the current stateof the economy and labor market remains tepid, and their outlook remainscautious," said Franco in the report. "Thus, all signs continue to suggest thatthe economic expansion will continue well into 2011, but that the pace ofgrowth will remain moderate."

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