2012 Credit Card Landscape Report

CardHub-2012-Credit-Card-Landscape-StudyThe nation’s continued recovery from the Great Recession sparked a number of interesting trends in the credit card market during 2012, as issuers reacted to the economy’s stabilization and adjusted to the post-downturn regulatory climate.  Perhaps most notable were the dynamics in play at opposite ends of the credit spectrum, with issuers targeting increasingly attractive sign-up perks to consumers who were able to maintain excellent credit despite the economic turmoil of previous years and CARD Act fee restrictions creating a competition vacuum in the bad credit space.

While 2012 also marked increased issuer receptiveness to the desires of progressively savvy consumers (by reducing foreign transaction fees and improving 0% financing deals), banks were also forced to compensate for the revenue lost as a result of making certain account terms more attractive by raising regular interest rates for some cohorts and increasing various fees (such as those associated with balance transfers and cash advances).  Unfortunately, consumers weren’t as quick to adjust to post-housing bubble spending realities, racking up $35.8 billion in new credit card debt by year’s end.  They did, however, display a willingness to leverage the Consumer Financial Protection Bureau’s new complaint reporting mechanism, and the tenor of their complaints will offer interesting insights into consumer behavior and market inefficiencies moving forward.

Of course, the complexity of the credit card market makes it impossible to effectively convey specific changes to the landscape in a brief summary.  As such, you can find a detailed breakdown of how various key market indicators ebbed and flowed on a quarterly basis throughout 2012 as well as what takeaways one can glean from these changes below.

Q1 Main Findings

  • Regular APRs rose relative to last year for most general-consumer credit cards – Relative increases between 4.2% and 5.7% were observed among general-consumer credit cards for excellent, good, and fair credit.
  • For business, student and secured credit cards, regular APRs stayed virtually unchanged relative to last year – Compared to the fourth quarter of 2011, however, secured card interest rates declined almost 9%.
  • 0% introductory terms are over 27% longer than in Q1 2011 – Zero percent rates for new purchases are nearly 28% longer than last year, and 0% balance transfer terms are around 36% longer.  Introductory terms now range from 6 to 18 months, depending on the card and type of transaction.  It appears that issuers are willing to sacrifice interest revenue in the early stages of the customer life cycle in the hopes of attracting more new customers and recouping this revenue later through higher regular APRs.
  • Foreign exchange fees continue their decline – More and more consumers appear to be catching on to these costly fees, and their interest in avoiding them is leading issuers to eliminate or decrease charges for foreign transactions.
  • Balance transfer fees rose - With 0% introductory periods getting longer and longer, issuers are once again increasing transfer fees to compensate for lost finance charges and are therefore reversing the trend of recent declines.
  • Initial rewards bonuses increased significantly – The average cash back initial bonus is over 90% higher relative to last year, while not much different than last quarter.  Points and miles bonuses are up nearly 20% compared to last year and 9% relative to last quarter.
  • Cash back rewards are 60% more lucrative – While the card with the best cash back rate across all purchases offered only 1.25% in Q1 2011, base rates as high as 2% are now available.

Q2 Main Findings

  • Regular APRs rose 7.74% for secured credit cards and 3.10% for student credit cards relative to Q1 2012, while remaining largely unchanged for most other credit card segments– The most likely explanation for interest rates increasing for consumers with less established or damaged credit is a lack of competition among issuers for business in these segments.
  • Foreign transaction fees fell 6.72% from Q1 2012 and 9.02% from the second quarter of 2011 and now average 2.22% – It’s a vicious cycle for issuers and a positive one for consumers – as more and more people realize the unnecessary expense posed by foreign fees, more credit card companies will slash these fees in hopes of garnering new business and other issuers will have to follow suit in order to keep up. We expect to see this trend continue moving forward.
  • Not only is the average 0% introductory APR for new purchases being offered for 2.17% longer than last quarter and 19.71% longer than this time last year, but 0% balance transfer periods are also 1.99% and 38.04% longer than in Q1 2012 and Q2 2011, respectively – Offering long 0% introductory periods and lucrative initial rewards bonuses has become a new go-to strategy for credit card companies looking to attract consumers with excellent credit.
  • Balance transfer fees are up 9.38% compared to Q2 2011 and 0.64% relative to last quarter – This represents the proverbial other shoe dropping in terms of the lengthening 0% balance transfer periods. Credit card companies are willing to offer low rates for longer, but they have to raise fees to compensate.
  • The value of cash back initial rewards and those offered in terms of points or miles are headed in opposite directions: Points/miles bonuses are 7.32% more lucrative than last quarter and cash back bonuses are 2.11% less lucrative – Cash back initial bonuses have been slightly more lucrative than points/miles bonuses of late, and the changes in Q2 2012 establish more balance. Points/miles bonuses are also cheaper for credit card companies to offer given that cardholders tend not to get full value from them due to a failure to either redeem or redeem strategically.
  • Data from Q1 2012 shows that the rate of credit card delinquency has decreased 20% since Q1 2011 and charge-offs are down 37.2% – Delinquency and charge-off statistics lag a quarter behind those related to rewards, interest rates, and fees, which is why data for Q2 2012 is not yet available. Nevertheless, the results from the first quarter of 2012 reveal an encouraging decrease in serious consumer credit card debt.
  • The top 4 complaints represent nearly half (48.8%) of all the consumer complaints made in June 2012 – It’s no surprise that “Billing Disputes” tops the list, but it’s interesting that issues with one’s interest rate were more common than matters relating to identity theft and fraud.  This perhaps speaks to the problems that people are having with out-of-control credit card debt.

Q3 Main Findings

  • Cash back initial bonuses got better during the third quarter of 2012 (becoming 6.49% more valuable than Q2), while points/miles-based bonuses got worse (12.21% less valuable).  This is an exact reversal of what happened the previous quarter. – It appears that credit card companies sweetened the pot with points and miles during the summer months in order to cater to the desires of folks looking to save on a vacation.  Now, with the busy holiday shopping season fast approaching, they are shifting the value to the more versatile cash back rewards.
  • Secured credit card interest rates are down 5.61% from last quarter and 7.16% compared to Q3 2011 – This again reverses a trend seen during Q2 2012 and illustrates that credit card companies have come to realize that secured cards pose little risk to them and that by improving product terms, they can garner a foothold with a sizeable and potentially lucrative consumer segment.
  • After steadily upping the ante, it seems that credit card companies have made 0% credit card offers about as attractive as they’re going to get in the short-term – While the average length of a 0% intro period is still a very attractive 10.06 months (12.15% longer than last year), that represents a 2.04% decrease from Q1 2012 and perhaps signals that now is the time for indebted consumers to make their move.
  • The average balance transfer fee for 0% balance transfer credit cards is now 2.88%, or 3.03% less than last quarter – In the past, issuers have raised balance transfer fees in accordance with extensions of 0% balance transfer introductory periods.  As the average balance transfer fee for cards with an intro rate fell 2.62% during Q2 and 3.03% during Q3, this is an indication that issuers realized they went overboard with the fee increases, and it’s obviously good news for consumers, as it makes balance transfer deals even more attractive
  • Cash back initial rewards bonuses are 6.49% more lucrative than last quarter and 20.44% more lucrative than this time last year– Last quarter, credit card companies increased the value of points/miles rewards bonuses while limiting the cash-based perks they doled out.  We’re now seeing the opposite take place.  One explanation for this change is the fact that points and miles are popular during the busy summer travel season, when people are looking to score free vacations, but the versatility of cash really comes in handy as we near the holiday shopping season.
  • Interest rates for people with good and excellent credit are 0.76% and 1.41% higher respectively, than this time last year – People with above average credit needn’t worry, as these interest rate increases merely reflect a bit of issuer reshuffling to accommodate the attractive 0% rates we’ve seen of late.
  • The top 4 complaints represent more than a third (41.2%) of all the consumer complaints made in Q3 2012 – It’s no surprise that “Billing Disputes” tops the list, but it’s interesting that issues with one’s interest rate were more common than matters relating to identity theft and fraud.  This perhaps speaks to the problems that people are having with out-of-control credit card debt.
  • Credit reporting complaints increased by 35.7% during Q3, complaints related to late fees increased 20.5%, and those concerning account closings and the payoff process rose 9.3% and 9.0%, respectively – It is interesting that credit reporting complaints increased right around the time that the Consumer Financial Protection Bureau announced that it is turning its attention to credit bureaus and, more specifically, the high incidence of mistakes in consumer credit files.  The emergence of other complaint categories could indicate that consumers are simply becoming more aware of their ability to submit grievances to the CFPB or that credit card companies are returning to some of the practices that got them into trouble prior to the Great Recession.

Q4 Main Findings

  • The value of initial rewards bonuses is on the rise:  At $66.56, the average cash-based bonus is 11.19% higher than during the third quarter of 2012 and 14.88% higher than last year.  In addition, the average points/miles-based bonus (10,336 points/miles) increased 9.14% from last quarter and 12.10% from last year.
  • 0% introductory interest rate offers have peaked:  At roughly 10 months, the length of the average 0% term has remained largely unchanged for two consecutive quarters, indicating that the value of such offers has plateaued.
  • Regular rates have increased slightly:  Across the credit spectrum, interest rates for unsecured credit cards were higher in Q4 2012 than both the previous quarter and the prior year.  Secured credit card interest rates are down 0.50% and 7.63% compared to last quarter and last year, respectively.
  • Penalty APRs remain static and very high:  At 28.23%, the average penalty APR did not change from Q3 2012.
  • Foreign transaction fees are stabilizing:  While the average foreign transaction fee has fallen more than 7% since last year, the downward trend is beginning to flatten out, as the 2.25% average we saw in Q4 2012 represents a 0.90% increase from the previous quarter.
  • Consumer complaints reflect rate stabilization and indicate increased consumer awareness of credit reporting errors:  According to the Consumer Financial Protection Bureau (CFPB), APR-related complaints fell nearly 20% during Q4 2012, while those related to credit reports increased more than 50%.

Data & Graphs

Interest Rate Landscape

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Excellent Credit 12.98% (+4.17%) 12.95% (+1.81%) 12.99% (+1.41%) 13.01% (+0.62%) 0.15%
Good Credit 17.12% (+5.68%) 17.12% (+2.76%) 17.17% (+0.76%) 17.24% (+1.23%) 0.41%
Fair Credit 20.30% (+5.13%) 20.15% (+4.35%) 19.18% (-0.83%) 19.58% (+1.08%) 2.09%
Secured Credit Cards 17.71% (-0.11%) 19.08% (-1.55%) 18.01% (-7.16%) 17.92% (-7.63%) -0.50%
Student Credit Cards 15.81% (-0.13%) 16.30% (+2.26%) 16.40% (+2.69%) 16.61% (+4.40%) 1.28%
Business Credit Cards 15.25% (+0.59%) 15.11% (+1.05%) 15.19% (-0.20%) 15.38% (+0.65%) 1.25%

 

Balance Transfer Landscape

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average Length of 0% APR Intro Period (in months) 10.07 (+36.27%)  10.27 (+38.04%) 10.06 (+12.15%) 10.05 (-0.10%)   3.93%
Range of 0% APR Intro Periods (in months)  6-18  6-18 6-18 6-18   N/A
Average Regular APR for Cards that have 0% Intro APR on Balance Transfers  16.59% (+3.11%)  16.55% (+0.98%) 16.59% (-0.42%) 16.60% (+0.06%)  -0.48%
Range of Regular APRs for Cards that have 0% Intro APR on Balance Transfers  8.15% – 25.99%  8.15% – 25.99%  8.15% – 25.99%  7.25% – 25.99%   N/A
Average Balance Transfer Fee for Cards with 0% Intro APR on Balance Transfers  3.13% (+3.99%)  3.15% (+9.38%)  3.07% (+8.87%)  3.02% (-1.63%)   4.50%

 

New Purchase Landscape

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average Length of 0% Intro Period (in months) 9.69 (+27.67%) 9.90 (+19.71%) 10.01 (+11.35%) 9.88 (+6.70%) -1.30%
Range of 0% APR Intro Periods (in months) 6-18 6-18 6-18 6-18 N/A
Average Regular APR for Cards that have 0% Intro APR on New Purchases 16.33% (+1.18%) 16.30% (-0.24%) 16.49% (-0.66%) 16.26% (-1.03%) -1.39%
Range of Regular APRs for Cards that have 0% Intro APR on Purchases 7.50% -25.99% 7.50% -25.99% 7.50% -25.99% 6.99% -25.99% N/A

 Rewards Landscape

Cash Back

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average Base Earn Rate 0.99 (+4.21%) 0.98 (+1.03%) 0.98 (-2.00%) 0.97 (-2.02%) -1.02%
Range of Base Earn Rate 0.25% – 2% 0.25% – 2% 0.25% – 2% 0.25% – 2% N/A
Average Initial Bonus $57.42 (+92.56%) $56.21 (+39.34%) $59.86 (+20.44%) $66.56 (+14.88%) 11.19%
Range of Initial Bonus $10 – $250 $10 – $250 $10 – $250 $10 – $250 N/A

Miles or Points

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average Base Earn Rate (in miles or points) 1.07 (+1.90%) 1.08 (+1.89%) 1.08 (+1.89%) 1.10 (+3.77%) 1.85%
Range of Base Earn Rate 0.5 – 5 miles/points 0.5 – 5 miles/points 0.5 – 5 miles/points 0.5 – 5 miles/points N/A
Average Initial Bonus (in miles or points) 10,051 (+19.29%) 10,787 (+20.87%) 9,470 (-1.56%) 10,336 (+12.10%) 9.14%
Range of Initial Bonus 25 – 60,000 miles/points 500 – 100,000 miles/points 500 – 70,000 miles/points 500 – 85,000 miles/points N/A

Fees

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average Maximum Late Fee $33.11 (+1.13%) $33.09 (+1.91%) $33.19 (+1.65%) $33.33 (+1.93%) 0.42%
Average Foreign Transaction Fee 2.38% (-5.56%) 2.22% (-9.02%) 2.23% (-9.35%) 2.25% (-7.02%) 0.90%
Foreign Transaction Fee Range 0% – 3% 0% – 3% 0% – 3% 0% – 3% N/A
Average Balance Transfer Fee for Cards with Intro Balance Transfer APR 3.05% (+3.04%) 2.97% (+5.32%) 2.88% (+4.73%) 2.80% (-1.75%) -2.78%

Penalty APRs

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average 28.53% (+3.00%) 28.51% (+2.19%) 28.28% (0.00%) 28.23% (-1.00%) 0.00%
Range 17.99% – 30.99% 17.99% – 30.99% 17.99% – 30.99% 17.99% – 30.24% N/A

Cash Advances

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Average APR 22.26% (+3.00%) 22.27% (+2.19%) 22.35% (0.00%) 22.36% (-1.00%) 0.00%
APR Range 6.25% – 49.90% 6.25% – 49.90% 6.25% – 36.00% 6.25% – 36.0% N/A
Average Cash Advance Fee % 3.72% (+3.62%) 3.73% (+0.81%) 3.75% (+0.27%) 3.87% (+3.20%) 3.20%
Average Cash Advance Fee $ Amount $8.89 (+0.68%) $8.91 (+1.02%) $8.97 (+1.36%) $8.86 (0.00%) -1.23%

Credit Card Debt

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Accumulation -$34.97 billion (+7.00%) $17.59 billion (-9.00%) $13.04 billion (-19.00%) $40.12 billion (-9.00%) 208%
Delinquency Rate* 3.11% (-20.00%) 2.79% (-20.29%) 2.83% (-18.4%) 2.78% (-16.27%) -1.77%
Charge-Off Rate* 4.38% (-37.2%) 4.23% (-24.01%) 3.81% (-32.0%) 3.85% (-14.79%) 1.05%

*Not seasonally adjusted

Unemployment

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Unemployment Rate 8.2% (-9.9%) 8.2% (-9.9%) 8.1% (-11.0%) 7.8% (-10.34%) -3.7%

Popular Consumer Complaints (Percentage of All Complaints Filed)

Q1 2012
(vs. last yr)
Q2 2012
(vs. last yr)
Q3 2012
(vs. last yr)
Q4 2012
(vs. last yr)
Q4 vs. Q3
Change
Billing N/A 21.3% 20.4% 20.1% -1.9%
APR or Interest Rate N/A 13.3% 12.7% 10.3% -19.3%
Identity theft / Fraud / Embezzlement N/A 8.1% 5.9% 4.9% -18.4%
Closing/Cancelling Account N/A 6.1% 6.7% 6.3% -5.3%
Collection N/A 5.0% 7.8% 7.7% -0.9%
Credit Reporting N/A 5.0% 6.8% 10.4% 52.6%
Credit Card Protection / Debt Protection N/A 4.3% 4.0% 3.4% -15.3%
Credit N/A 3.7% 6.5% 5.9% -10.3%
Payoff Process N/A 3.1% 3.4% 2.6% -23.6%
Fees N/A 3.1% 7.2% 7.9% 10.7%

 

Notable 2012 Credit Card Offers

Balance Transfers:

  • Slate from Chase – No balance transfer fee with 0% APR on both balance transfers and purchases for 15 months.

Points/Miles:

  • PenFed Platinum Rewards – 5 points per $1 spent on gas purchased anywhere as well as an initial bonus worth $250.
  • British Airways Credit Card – Offered an initial bonus of up to 100,000 miles – 50,000 after your first transaction, 25,000 when you charge $10,000 during the first year, and another 25,000 when spend $20,000.

Secured:

  • Consumers can no longer apply for the Orchard Bank Secured MasterCard, which was popular due to its 7.9% APR and no first-year annual fee, as well as other cards under the Orchard Bank brand name following Capital One’s acquisition of HSBC’s US credit card business, of which Orchard Bank was a subsidiary.
  • First Progress Platinum Elite MasterCard Secured Credit Card – This card had one of the lowest annual fee-interest rate combinations on the secured card market, with a $29 annual fee and a 19.99% APR.
  • Harley Davidson Secured Credit Card – Not only was this one of the few secured credit cards that did not charge an annual fee, but it was also one of the only ones that offered rewards.  You got one point per dollar spent as well as an entry to win a new motorcycle each month.  While the Harley Davidson branding might mislead or turn off some potential customers, its exceptional terms are really all that matters.

Other Years’ Reports

 

This report was compiled using data from the 1000+ credit card offers that CardHub.com monitors on a daily basis. For questions or more information regarding this report, please contact our media department.

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