Credit Card Interest Rates on the Rise

The three consecutive rate hikes by the Fed are like pouring lemon juice on a paper cut for consumers tangled up in penalty interest rates. Starting next month, punitive interest rates, among the top ten issuers, will range from 24.65% to 30.74%. Across the entire U.S. credit card market, penalty interest rates will range from none to 41.00%. Providian, the 10th largest U.S. issuer, levies the greater of prime +25.99% or 29.99%, on cardholders who miss payments or default in some way.

CompuCredit, an Atlanta-based issuer of "Aspire VISA" card, charges an interest rate of prime +36.25% with a 41.00% minimum, to its most risky cardholders who become delinquent. Today, consumers may have their interest rate boosted to the penalty level for missing one or two payment due dates, or for going over the credit limit a time or two. Many issuers also assess the highest rate under the "universal default" clause in the "Cardholder Agreement."

Under "universal default" an issuer may change the rate if the cardholder defaults under any credit agreement, even if the account is with another creditor for auto loan or mortgage. This week, the Fed raise short-term interest rates by 0.25%, boosting the prime rate to 4.75%.

         CREDIT  CARD  PENALTY  INTEREST  RATES
              (effective 10-1-04)
                              June      Oct
         1. Citibank         27.99%    28.74%
         2. MBNA             24.99%    24.99%
         3. Bank One         27.74%    28.49%
         4. Chase            25.99%    26.74%
         5. Discover         24.99%    24.99%
         6. Capital One      25.90%    25.90%
         7. Am Express       25.99%    26.74%
         8. Bank of Amer     25.99%    26.74%
         9. HSBC/HH          23.90%    24.65%
        10. Providian        29.99%    30.74%
            AVG              26.35%    26.87%
         Source: CardWeb.com's CardWatch(R) 
	 

Look for the credit cards with the best rates

Even though reward programs are heavily promoted by credit card issuers, consumers prefer a low interest rate or no annual fee most of all. Nearly half of Americans (47%) say a low interest rate is the most valuable credit card feature, while one-fourth say no annual fee is the best feature.

According to a CardWeb.com homepage poll conducted between September 7th and 28th, only 21% of the 1,302 participants designated rewards for purchases as the most valuable credit card feature. Slightly more than 3% say a high credit limit is the biggest attraction while about 2% say online account access is the most valuable.

Less than 2% says automatic discounts are the key feature they look for in a credit card offer. Information provided by (The CardWeb.com) and there survey has a margin of error of plus or minus approximately 4.0 percentage points.

                 HOMEPAGE POLL  9-7 to 9-28
       Question: Which of the following is the most
       valuable credit card feature?
              Low Interest Rate      47%
              No Annual Fee          25%
              Rewards for Purchases  21%
              High Credit Limit       3%
              Online Account Access   2%
              Automatic Discounts     2%
              Source: CardWeb.com, Inc. (R) .