Many consumers are still getting help with debt

At the end of December 2020, around 2.87% of accounts in the auto, credit card, mortgage or unsecured personal loan accounts were still in some form of financial hardship status.

But the percentage of accounts in that status continue to fall from a high of 4.77% in May 2020, according to TransUnion’s Financial Services Monthly Industry Snapshot Report.

TransUnion data includes all of the accounts with accommodations at the end of December plus those that had accommodations pre-pandemic.

The percentage of credit card accounts in financial hardship status fell from a high of 3.73% in May 2020 to 2.42% in December 2020. 

Repayment preferences vary

Among those consumers with loan accommodations, plans to repay the money were diverse, according to TransUnion.

The research showed that around 25% of them want to return to making regular payments and negotiate with lenders to increase the length of the loan, while 19% would like to continue the accommodation and 17% want to catch up by making bigger payments.

See related: Credit card spending rebounds from pandemic plunge

Delinquencies and hardship program situation surprisingly positive

Ted Rossman, industry analyst for CreditCards.com, said that in general, the outlook for delinquencies and hardship programs is surprisingly positive.

“Delinquencies have actually fallen during the pandemic and fewer customers than we initially expected have enrolled in hardship programs, plus many have already gotten back on track,” Rossman said.

For example, Chase reported that more than 90% of customers who exited their assistance program have remained current on their payments.

And, according to the ABA Banking Journal, “Bank card delinquencies fell 109 basis points to 1.52% of all accounts in the second quarter, declining to the lowest level on record. In the third quarter they were essentially flat.”

Rossman noted that government stimulus programs deserve a lot of credit, along with many consumers spending less and making debt payoff a priority.

“It seemed like the stimulus impact was starting to wane late in 2020, but Congress and the Trump Administration agreed on another round of stimulus right before New Year’s and the Biden Administration is intent on implementing an even larger program soon,” Rossman said.

Rossman said we’re not out of the woods yet, but there’s growing optimism that the worst has passed and we will not see nearly as many delinquencies and defaults as we did during the 2007-2009 financial crisis.

See related: What to do if your credit card is closed due to delinquency

Source: creditcards.com

Chase Sapphire cards offering rewards, statement credits for groceries

Ten months into the COVID-19 pandemic, many consumers have settled into new routines and developed new spending patterns. One of the spending categories that hasn’t lost its popularity is groceries, as many people are cooking more at home and eating out less frequently.

See related: Grocery shopping and COVID-19: What’s changed and how to save money

Credit card issuers are adapting to these new patterns as well.

On Oct. 20, 2020, Chase announced it would be temporarily adding grocery rewards to the Chase Sapphire Preferred® Card* and Chase Sapphire Reserve®. This comes on top of other limited time offers the issuer has recently added, such as limited time redemption options through Pay Yourself Back and gas and grocery store purchases counting toward the Reserve card’s $300 travel credit.

See related: Guide to Chase Pay Yourself Back

“Throughout this very unique year, we’ve provided our cardmembers flexibility and options to get the most out of their cards …  as well as limited time opportunities to earn more points on certain spending,” Chase said in a statement. “We want to continue to give our cardmembers ways to maximize value where they are spending today.”

On top of that, on Jan. 28, 2021, Chase added an offer for new Chase Sapphire Preferred cardholders: a one-time automatic $50 statement credit on grocery store purchases.

How the limited time grocery rewards work

Starting Nov. 1, 2020 and running through April 30, 2021, Sapphire Reserve cardmembers will earn 3 points per dollar on grocery store purchases, and Preferred cardmembers will earn 2 points per dollar, up to $1,000 in purchases per month. According to Chase, this will be automatic for existing and new cardmembers.

See related: Best credit cards for grocery shopping

This provides cardholders with an excellent opportunity to earn some of the most valuable travel points while travel is still limited.

The new offer also makes Sapphire cards more competitive when compared with the recently updated Chase Freedom card suite. In August, the issuer replaced the Chase Freedom with the Chase Freedom Flex and added three new valuable rewards categories to both the Freedom Flex and Chase Freedom Unlimited, namely bonus cash back on travel purchased through Chase Ultimate Rewards and on dining and drugstore purchases.

Considering neither Freedom card charges an annual fee and both earn Chase Ultimate Rewards points, some cardholders may be wondering if the Chase Sapphire Reserve is worth keeping during a time when most of its premium travel perks might go unused.

Fortunately, all the limited time offers coupled with temporary grocery rewards make it much easier to get value of these popular travel cards – even when you’re not traveling.

How the grocery statement credit works

Another incentive to apply for the Chase Sapphire Preferred card now is the new one-time $50 statement credit on grocery purchases.

New cardmembers will get access to the statement credit automatically and be able to use it for 12 months from the time of account opening. Eligible purchases include purchases made at merchants coded as grocery stores. Warehouse club purchases won’t qualify.

Chase hasn’t announced the offer’s expiration date yet.

Chase Sapphire cards value at a glance

Chase Sapphire Reserve®

Chase Sapphire Reserve®

Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card

Newly added limited-time benefits Cardmembers earn more on grocery store purchases: Nov. 1, 2020 – April 30, 2021

  • 3 points per $1 spent
  • Up to $1,000 in grocery store spend per month

Gas and grocery purchases count toward Sapphire Reserve $300 travel credit: 

  • Gas and groceries have been added as qualifying purchases, through June 30, 2021
New cardmembers receive an automatic statement credit:

  • One-time $50 statement credit on eligible grocery store purchases available for 12 months from the account opening

Cardmembers earn more on grocery store purchases: Nov. 1, 2020 – April 30, 2021

  • 2 points per $1 spent
  • Up to $1,000 in grocery store spend per month
Existing benefits
  • 3 points per dollar on dining purchases with restaurants – including delivery and pick-up
  • 3 points per dollar on travel – including tolls and parking
  • Complimentary DashPass Subscription from DoorDash, valued at over $100 per year
  • Up to $120 in statement credits on DoorDash purchases – $60 in statement credits through 2020 and another $60 in statement credits through 2021
  • 10 points per dollar on Lyft rides
  • Complimentary Lyft Pink membership, worth a minimum of $199 in value when you activate by March 21, 2022
  • Pay Yourself Back: Points are worth 50% more now through April 20, 2021 when redeemed for purchases in current categories of grocery, dining, home improvement and contributions to select charities
  • Chase Dining: Points are worth 50% more when redeemed through the new Chase Dining hub in Ultimate Rewards, now through April 30, 2021
  • 2 points per dollar on dining purchases with restaurants – including delivery and pick-up
  • 2 points per dollar on travel – including tolls and parking
  • Complimentary DashPass Subscription from DoorDash, valued at over $100 per year
  • 5 points on per dollar on Lyft rides
  • Pay Yourself Back: Points are worth 25% more now through April 20, 2021 when redeemed for purchases in current categories of grocery, dining, home improvement and contributions to select charities
  • Chase Dining: Points are worth 25% more when redeemed through the new Chase Dining hub in Ultimate Rewards, now through April 30, 2021

 

Bottom line

While travel isn’t the most lucrative rewards category at the moment, your Chase Sapphire card can still bring you plenty of value, especially given the temporary rewards categories and other limited time offers.

*All information about the Chase Sapphire Preferred Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. This offer is no longer available on our site.

Source: creditcards.com

Average credit card interest rates: Week of January 6, 2021

The average credit card interest rate is 16.05%.

After a historic 2020 caused credit card rates to plunge by more than one and a quarter percentage points between December 2019 and December 2020, the national average credit card APR began 2021 near a three-year-low. For the sixth consecutive week, average rates on brand-new credit cards remained at 16.05%, according to the CreditCards.com Weekly Credit Card Rate Report.

None of the cards included in the weekly rate report revised new APRs this week. As a result, consumers shopping for a new card continued to enjoy some of the lowest average rates available to borrowers since 2017.

Slow start to 2021 may signal stable year for credit card rates

Changes to new credit card offers have become relatively rare in recent months as most lenders tracked by CreditCards.com leave card APRs untouched.

Last spring, nearly all major lenders except for Capital One, cut APRs on all brand-new cards by 1.5 percentage points – in tandem with the Federal Reserve’s emergency rate cuts. The Fed chopped its benchmark interest to near zero in March in response to economic weakening from the coronavirus pandemic. When the Federal Reserve revises its benchmark interest rate, most lenders revise APRs on new and current offers by the same amount.

Since March, few lenders have independently revised APRs. With federal interest rates as low as they can go, widespread rate changes have also stopped completely and are unlikely to return any time soon.

As a result, the national average card APR has stubbornly remained within rounding distance of 16% since spring, budging by less than a tenth of a percentage point between April and December.

Over the past seven months, in particular, card APRs have been especially stable. Among the 100 card offers tracked weekly by CreditCards.com, for example, only a handful of card offers have changed since early summer.

A small number of credit card lenders hiked APRs on select cards in the last few quarters of 2020 after briefly matching the Fed’s emergency rate cuts.

For example, Wells Fargo, Citi and American Express all matched the Fed’s rate cuts. But they each later bumped up the APRs on some of their most popular cash back and balance transfer cards within months of cutting rates. In most cases, though, the lenders only hiked rates on one or a few cards.

Meanwhile, an even smaller number of lenders tracked by CreditCards.com pushed up APRs on select subprime and retail credit cards. For example, U.S. Bank substantially increased the APR on its primary secured credit card, while the retailers Nordstrom and Cabela’s hiked APRs on their namesake store cards.

The changes to new credit card offers were too few and far between, though, to significantly dent the national average.

See related: Best credit cards

Borrowers are likely to enjoy low rates for some time

The relative stability in rates echoes previous post-recession years when federal interest rates were at rock bottom. Between 2010 and 2015, for example, lenders rarely revised the lowest available APR on brand-new cards. As a result, the national average card APR – which is based on cards’ lowest available rates – remained within rounding distance of 15% for more than six years.

The Federal Reserve has signaled that it will likely leave its benchmark interest rate near rock bottom for at least another year. So new cardholders likely have some time to pay off their debt before higher interest rates kick in.

See related: How do credit card APRs work?

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.05% 16.05% 16.03%
Low interest 12.77% 12.77% 12.83%
Cash back 15.85% 15.85% 16.09%
Balance transfer 13.85% 13.85% 13.93%
Business 13.91% 13.91% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.53% 15.53% 15.48%
Rewards 15.76% 15.76% 15.82%
Instant approval 18.38% 18.38% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: January 6, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com