March 14, 2009
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News: Credit Card Rates Looking Better.
Reports just in from CreditCards.com reveal some good news for credit card consumers. After four weeks of steadily rising, national APR levels for new credit card offers have turned and are falling. This average, as calculated, does not include lower-rate credit card promos (which could skew the curve temporarily). Category by category, three have risen, three have fallen and two have remained unchanged. But, the overall cumulative has fallen.
The Retail Industry is showing the beginnings of an up-tick, as well. Improvement was reflected for January and then seemed to ‘flatten' last month. That leveling off was largely attributed to the floundering auto market, which is bound to struggle for a while. Without counting this category, retail sales saw an improvement of about 0.7%. Just since last week though, the national average for new credit card offerings fell from 12.66% to 12.14%. Consumers are beginning to show signs of using their credit cards more.
The caution, of course, is that new credit card charges may turn into default as unemployment continues to rise. We seem to have conflicting reports between the bad news coming from Fitch and the good news coming from TransUnion over the direction of default increase. This anomaly seems to be the result of the way things are compared.
Fitche's criteria is to compare the last two quarters against each other whereas, TransUnion's is comparing the last quarter with the corresponding quarter from the year before. So, it could be said that short-term indicators of credit card default are negative while long-term indicators are positive. On the short-term note, Fitch has pointed out that level 2 and above default rates (60 days or more) have reached an all-time high (since 1991 when the Fitch measurement began) for the second month in a row. Both agencies, Fitch and TransUnion, do agree that the struggles will not pass until the unemployment crises abates sometime next year.