Business Rewards Credit Cards Buck Rising Trend

April 15, 2012

Current averages:
  • Average consumer credit card rate, overall market: 16.92 percent
  • Average consumer non-rewards credit card rate: 15.11 percent
  • Average consumer rewards credit card rate: 17.69 percent
  • Average student credit card rate: 16.98 percent
  • Average business non-rewards credit card rate: 14.74 percent
  • Average business rewards credit card rate: 15.40 percent

The US bank prime rate has been unchanged since the beginning of 2009, at 3.25 percent.

Contradictory trends

The first half of April saw contradictory trends in credit card offers. The movements in question occurred in the rewards categories of consumer and business credit cards: the average consumer rewards credit card rate rose slightly, while the average business rewards credit card rate fell. In turn, these changes affected the relationships between rewards and non-rewards cards, and between rates offered to customers with excellent credit ratings and those available to customers with average credit ratings.

Changes in these relationships will be discussed in more detail in the sections that follow, but as a general observation, these types of individual, segment-by-segment moves are what can be expected in an environment in which the bank prime rate has been unchanged for a long period of time.

The prime rate

If the prime rate were to change, one could expect credit card rates to move across all categories, and in the same direction. However, absent any across-the-board change in interest rates, credit card companies are left to assess the risk and attractiveness of each segment of the credit card market, and change rates only when one of those assessments changes.

This is why credit card rate changes over the past couple of years have tended to be somewhat piecemeal, occurring in one or two segments but not all of them. It also explains how some of the changes for different categories can appear to be contradictory, with one category of rates rising while another falls, as was the case this month.