The interest rates on many credit card offers declined this week after the introduction by Capital One of several cards with lower interest rates. The average annual percentage rate across the country slipped to 14.15 percent in this week, touching the lowest point since the middle of May. This decline from last week`s 14.35 percent has been the largest since the beginning of April and followed the decision of Capital One to slash interest rates on several of its credit cards that are being offered.
The bottom end of the ranges of interest was lowered by Capital One by several points. For example, Classic Platinum Young Adults card would now be offered to a select card holders for 14.9% compared to the standard interest rate of 19.8% for other applicants. According to the co-manager of First Annapolis Consulting card issuing practice, John Grund, this move is not surprising as it seems to be a test strategy for the given card segment in the market.
The offers are often varied by the credit card issuers depending on the medium. This means the offers sent by mail are different from the offers sent online. This is because of the target audience which is different for different mediums. Grund also felt that this offer could be varied online based on where or when such offers are viewed by the visitors. A good example would be that the Wall Street Journal website would have a different audience compared to the website of People Magazine`s site. Card issuers usually price to balance that risk and that is why go for higher interest rates in many cases. Most of the rates went down because of these pricing adjustments. This is because averages are usually calculated taking into account the lowest annual percentage rate offered by a card which was lowered by Capital One thus sending the averages plummeting down.
However, on this front Capital One isn`t the only card issuer. The top range of APRs on four of its cards has been increased by Discover. Since these were the top end they didn`t cause any change in the national average. Most of the year, the rates have been increasing though. For example, the average card holder with a 5000 dollar debt, paying off 150 dollars per month would be paying 156 dollars extra at today`s interest rates compared to that of January 1st 2010.