If investors were hoping for movement in the credit card sector, they’ll be waiting awhile longer as numbers released today show the interest changes unchanged.
The APR is calculated by a combination of factors, and specifically, the data comes from the top 100 credit cards in the U.S. It also considers the various dynamics with credit card offers, such as perks, benefits, intro rates and whether or not there exists balance transfer options. After taking into consideration all those factors – along with several more – the national average annual percentage rate on new card offers equate to a steady 14.92 percent.
In recent months, credit card offers haven’t budged and this includes promotional balance transfers and purchase rates. Further, only three banks have even changed or redefined their current credit card offers. Bank of America and Barclays are two of those banks. Three networks altered, albeit slightly, their rates, but only with credit cards with many perks. Those networks include Discover, PNC Bank and Citi.
Wild Card
Financial analysts say this is unusual. Still, with so many wild card factors thrown into the mix, it’s more likely the credit card networks and banks are opting to withhold changes until other dynamics play out. The European crisis, unemployment and the threat of credit downgrades by Moody’s taint the air and are surely affecting the decision making process of these institutes.
Even as consumers are seeing few ads or watching other marketing ploys decrease, they’re also seeing traditional mail offers drop, too. The banks simply aren’t sending out as many offers – and certainly when compared to the same time period in 2011. In fact, 2012 is unfolding as a record year. In late 2011, all the credit card networks were ramping up their marketing plans and those plans included aggressive marketing well into 2012; instead, the opposite has happened.
Andrew Davidson, senior vice president at Mintel Comperemedia, said,
The last time volumes were lower was back in March 2010. At that time, a comeback in direct mail was gathering steam following severe cutbacks during the recession. That comeback turned into a two-year period of expansion that peaked in June 2011, when 497 million offers were received by U.S. households.
So is it only the economy that’s affecting these offers – or lack of? Analysts say it is. They insist say that banks have been reluctant to send out more offers until the economy improves or even begins to show signs of improvement. Marketing efforts right now wouldn’t have the same results as what they’d see in a stronger economic climate. “It’s all about the fact that banks are skittish about lending and consumers are skittish about borrowing.”, said Davidson.
Durbin Amendment
There are also other considerations, including the Durbin Amendment, which went into effect last year. It works to cap fees associated with debit card usage, but it has also left banks struggling to find other sources of revenue. As a result, the banks are reining in their more aggressive efforts – not to mention slashing their marketing costs, which could account for fewer traditional mail-outs.
It’s important to keep in mind that while all these factors play a role on their own, to get the total picture, one must consider not just the parts, but the sum of tight regulations, unemployment, consumer caution and even global recovery concerns.
The bad news is found in balance transfer cards – or to be more specific, the fees in balance transfer credit cards. Anything with less than 3% is tough to find in this market – and it’s not likely to change in the near future.
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