The Not-So-Rewarding Credit Card
If you're using a credit-card that offers a cash-back award and you don't pay it off in full every month, you may want to consider whether the card's worth keeping.
Why? Many of these cards have significantly boosted their interest rates in the past few months -- way more than other credit-cards, says Justin McHenry, research director for IndexCreditCards.com Credit Card Monitor, which tracks hundreds of credit cards.
"For people who don't carry a balance," the interest rate hike won't be a concern, McHenry said. But for those who do, "what you get back in cash may not make up the difference in what you will pay" in a higher interest rate. As a result, McHenry says, you may want to consider switching to a card that bears a lower interest rate.
McHenry said that within the past two months he's seen the average credit card interest rate take off. This week, the average interest rate for consumer credit cards without rewards increased to 13.8 percent, up from 12.6 percent in January. (Consumers with the very best credit are being charged an average 10.89 percent).
For consumer cards offering rewards, the current average APR (annual percentage rate) climbed to 15.18 percent this week, up from 13.64 percent in January. That's a considerably steeper increase than the half point rise made by the Federal Reserve this year, McHenry notes.
The one group that has bucked the interest-rate trend: small-business credit card customers. The average non-reward business credit card rate is 11.39 percent, barely up from the 11.33 percent that was charged at the beginning of the year, McHenry notes. It's a similar story with reward business cards, which have an average rate of 13.51 percent, up from 13.21 percent. One reason: increased competition for this customer who typically needs to have strong credit scores to qualify.
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