The concept of “Low” is relative. Pre-financial crisis, it was not unusual for consumers to see credit cards with APRs in the single digits. Currently, cards boasting “low” interest rates have APRs that generally fall somewhere in the range of 11 – 14%, which, when compared to cards with APR’s of 19 – 25%, seems like a steal. However, the “low” bracket has been inching ever upwards since President Obama signed the Credit Card Accountability Responsibility and Disclosure (CARD) Act in 2009.
Aside from a trickle of 0 balance transfer credit cards, low interest rate credit card deals seem to have all but dried up. This is because credit card issuers have had to come up with new methods of generating revenue not that they are not able to rely upon random interest rate hikes as a result of the CARD Act.
Previously, before the government intervened on the behalf of the consumer, credit card companies could issue exorbitant fees and seemingly arbitrary rate hikes, thus profiting while pushing many hapless borrowers in to dire personal financial straits. One of the only legitimate ways left for card issuers to profit these days is by keeping interest rates higher.
Another trick employed by banks is to aggressively market premium cards to consumers, ones with hefty annual fees and mid-range APRs but such touted perks such as a 24-hour concierge service hotline or few airline tickets or upgrades. Annual fees are becoming more prevalent across the board, with cards that never used to have such a thing now implementing them as a way to make money.
Part of the problem is that consumers are slower to open up new accounts for lines of credit, because economic uncertainty is inspiring them to dig in and pay down their existing debt instead. This contributes to the upwardly-creeping APR bracket, making what was once considered “mid-range” the new “low.”
Whether or not truly low APR credit cards will ever make a comeback is dependent upon the economy. As long as consumers remain wary of the offers credit card companies are trying to sell them on, issuers will have no choice but to continue redefining what passes as a “low” annual percentage rate.