The Average Credit Card Interest Rate? A Whopping 21 Percent!
Credit companies love baiting consumers by saying,”Hey, we’re interest-free!” followed by a murmured “for 12 months.” After the teaser period passes, card issuers trap their members with a 21 percent interest rate — that’s more than two percent higher than last year!
According to CardHub, for the first three months of 2014, credit card rates were “higher across the board” in comparison to the same time last year. On average, American cardholders have been hit with a 21 percent interest rate — an increase of 2.12 percent percentage points from 2013, The New York Post reports. This might not seem like much, but it accrues into a significant difference over the long-term.
“I think credit card companies are essentially realizing that consumers are more focused on introductory rates. So they are not paying much attention to what happens after the introductory rates,” Odysseas Papadimitriou, CEO of CardHub, said.
The words “zero percent APR” might be alluring, but consumers are neglecting to read the fine print. When the teaser period ends, the interest rate will jump — sometimes astronomically. Assuming a customer hasn’t paid off his or her balance yet, rates can range from 9.99 to 25.99 percent, depending on his or her credit score. Your typical credit card rep won’t know or will not go out of his or her way to tell you. So check the company’s terms and conditions. Determine how long the introductory rate lasts and pay off your balance before the higher interest rate kicks in.
You can open the card, take advantage of the perks, and close it when the teaser period expires, but even that comes at the expense of the cardholder:
“Your credit score takes a small hit every time a card issuer pulls your credit report to see if you qualify for a new card. A new card also shortens the overall age of your accounts, which dents your score. Lastly, closing an account reduces the amount of available credit, another ding to your score,” FoxBusiness said.
And buyer beware: the teaser period may end quicker than you expected, for example, if you’re late with just one payment.
More than 50 percent of card holders, according to ABC News, fail to pay off their balance before the teaser period expires.