Credit Card Rates on the Rise as Spending Wobbles

As consumer spending growth continues to slow, credit card issuers are using more perks to prod shoppers to use their cards, according to a new CardHub study. Meanwhile, credit card interest rates are rising—a separate but related effort by the credit card industry to make up for revenue lost by the customer pool that’s less likely to make late payments.

The card-comparison website’s report, now in its fourth year, is a useful snapshot. Among the trends: Rates rose an average of 2.1 percent in the first quarter of 2014 over the year-ago period. From the fourth quarter of 2013, rates ticked up for cardholders with excellent and good credit; rates for those with fair credit fell 6.73 percent.

Meanwhile, the average initial bonus of points or miles awarded with new cards rose 10 percent year over year, while cash-back rewards increased 15.2 percent. Issuers want to keep Americans spending as the country continues its fitful economic recovery. Data from First Data SpendTrend show credit card spending growth is slowing down—at a 2.24 percent year-over-year increase for March 2014, down for a third straight month and well below a peak of 4.85 percent in June 2013.

Meanwhile, Americans are getting better at keeping their consumer debt in check. Thirty-day delinquency rates for credit cards from American Express, Bank of America, Capital One, Chase, Citibank, and Discover continue to fall, down 19 percent from a year ago and 68.7 percent from an all-time high in March 2009, according to Bloomberg data.

One factor that might be weighing on card use: the unprecedented security breach at Target, as well as at other retailers, last year. Complaints about identity theft, fraud, and embezzlement were up 61.5 percent vs. last year, CardHub says.

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