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What Happened to Low Interest Credit Cards

People often mention to me that card rates are unusually high these days. I can't help but think at times that these folks are trapped in a delusion of having once lived in a never-never land of sorts. I never recall the national averages for credit cards being anything but high. It used to be that the average fixed low interest rate credit card had rates that hovered around 20 percent or so. If you were lucky you could find some offers well below that mark, and indeed you still can. A survey by the General Accounting Office in 2005 clearly stated that about 80% of the 6 largest card issuers customers had cards with less that 20% APR. So it appears that rates are not more historically high as in the past. However, this era we now have many cards that feature interest rates as high as 30 percent and fees as high as $39 a pop!

This situation and it's current result harks back to the early 1980s when a new concept called "Risk Based Pricing" grew into it's own. This concept basically allowed card issuers to offer cards with lower costs and fees to the less risky cardholders while extending more extreme fees and costs to those in the customer base who are more credit challenged. Sometimes , due to anything from shifts in the general health of the economy to simple incompetence of a card firm's management, this model fails to remain static. As a result the persons who are more creditworthy are left having to cover the difference by means of manifested increases to their interest rates and fees.

Generally, according to the bankrate.com website, credit cards that are of the lowest interest fall into what is called the "Platinum Card National Rate Average". While the fixed rate has pretty much remained stable, even dipping down below 10% in early 2006, the variable platinum card interest rate has climbed from just over 11% to well over 13% since 2005. Judging from simple interest rates alone, it would make simple sense to avoid variable platinum rate cards to begin with and just stick with fixed rate ones because at no time during the past several years was it any cheaper at all to have a variable rate card based on the National Averages.

It would seem logical that the deciding difference would be the perks associated with most variable rate offers. Just more proof that it is true that credit card rewards are just what one gets for being charged too much interest in the first place.

About the Author:

A lifelong resident of Las Vegas, Nevada, Sam Donaldson is the current staff writer for www.credit-cards-with-rewards.com/ .

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