Credit card rates dip again, but more hikes likely coming soon

Interest rates on new credit card offers declined slightly this week, although experts say that dip doesn't mean cardholders should expect to borrow by plastic cheaply anytime soon.

For the second straight week, Bank of America trimmed the annual percentage rates on one of its card products, slightly lowering the national average interest rates on new credit card offers to 12.97 percent, according to the Weekly Credit Card Rate Report. That decline -- though small -- marks the first time since June that the national average has fallen for two consecutive weeks. Still, experts say these recent declines represent just a temporary break from, not an end to, interest rates' steady upward climb.

"No doubt about it -- consumer credit is going to be more difficult for everyone to get, and more expensive when people get it, over the course of the next few years," University of North Carolina at Charlotte finance professor Tony Plath says.   

A pricey time for cardholdersAlthough annual percentage rates (APRs) have come down recently, it's still much more costly to borrow on plastic than it was earlier this year. As banks guard themselves against losses due to high unemployment and increasing regulation, cardholders are paying the price. For example, someone who borrowed $5,000 on a credit card today and consistently paid $150 per month at today's rate would have to pay $6,234 to pay off the debt. That's $128 more than would have been required in June. 

The APR increases aren't spread evenly among the nine types of cards tracked by Over recent months, it's become particularly costly to carry debt on balance transfer and rewards cards. Since late September, balance transfer cards have seen their annual percentage rates increase by more than a point and a half, while reward credit cards have seen their APRs increase by over a point.

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Still, Moroney says that even as APRs continue to rise overall, banks may be willing to cut their most responsible cardholders a deal, selectively lowering rates for certain borrowers. For banks, "right now, the name of the game is hold on to your good customers and get them to use [credit cards] more," says Moroney. 

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