Credit card ratesMortgage and savings interest rates may be plummeting, but credit card issuers aren't in such a giving mood.

According to, the average credit card rate has barely budged over the past year. But it's actually worse than that.

Credit cards now charge 14.34% in interest annually, according to's Complete Credit Card Index. The Federal Reserve reports a similar figure: 13.22% for interest-bearing credit card accounts. Either way, the average rate is up sharply from 11.64% when the CARD Act went into effect in May 2009.

For those who don't remember, the pro-consumer CARD Act introduced new rules for banks designed to prevent, or at least reduce, their unfair credit practices. Among other things, the law requires issuers to give 45 days' notice before changing terms, and caps fees at 25% of the card's initial credit limit.

Now banks appear to be using higher overall interest rates in order to make up for income lost as a result of the CARD Act.

The federal funds rate at which financiers loan money to each other on a short-term basis -- sometimes overnight -- still hovers around 0.25%. The prime rate, upon which most consumer loans are based, sits at just 3.25%. So banks seem to be enjoying fat margins on the consumer lending business.

Consumers Feed the Beast

Banks' good times could go on for a while. According to the Fed, revolving consumer credit (i.e., credit cards) rose more than $4 billion in August, up 5.9% year over year. And consumers have added debt in four of the past five quarters.

Banks don't need to lower credit card interest rates to stimulate spending demand. We feel too good to cut back.

New data from Thomson Reuters and the University of Michigan shows that consumers are as confident as we've been in five years, which is great news for retailers, manufacturers, and, of course, banks.

"Consumers have, all things considered, been spending reasonably well," Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, told Bloomberg. He cited rising stock prices and a stronger residential real estate market as keys to our renewed confidence.

There's just one problem: Rising real estate and stock prices offer nothing more than paper gains. Only on those rare occasions when we sell a home or dispense of a large stock position do we realize generous profits. So where's the spending coming from? Look again at the Fed data: It's credit cards.

Smart Money Moves, Even If You Don't Have Credit Card Debt

Some will find this pattern disturbing or even depressing, and understandably so. Unemployment is improving, but remains at 7.8%, while growth in U.S. gross domestic product, or GDP -- often used as a barometer for the overall health of the economy -- puttered along at 1.3% in the second quarter, well below the 1.7% economists had expected previously. It takes a special kind of confidence (ignorance?) to feel good about numbers like that.

What to do? Certainly not panic. Economic conditions may be volatile, but most prognosticators see accelerating economic gains in the year ahead. Working a few extra hours to earn money to pay off what you owe might make the windfall -- if it comes -- even more fruitful.

For those who've already paid off their balances, adding exposure to some of the big names in consumer banking might make sense.

Rising debt balances combined with hefty interest rates have Wall Street expecting big profits from the likes of American Express (AXP), Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM):

Metric American Express Bank of America Citigroup JPMorgan Chase
Current quarter EPS estimate $1.09 $0.0 $0.97 $1.20
Year-over-year growth 5.8% (101.4%) (21.5%) 18.1%
Full-year EPS estimate $4.41 $0.41 $3.98 $4.74
Year-over-year growth 7% 242.8% 8.8% 5.8%
Current P/E ratio 13.70 9.90 10.30 9.50

Source: AOL DailyFinance

What do you think of these banks right now? Is there a better way for investors to play our national addiction to debt? Make your voice heard by leaving a comment in the space below.

Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool owns shares of Citigroup, Bank of America, and JPMorgan Chase. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express.

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Sunaina Dialabank

Credit card today is one such instrument whose demand has been increasing day by day because of the seeming advantages that it offers. These days, there is a huge demand for the best credit card in India from people from all walks of life including students, working professionals, business people, housewives, etc. All of them need credit cards either for specific or miscellaneous purposes ranging from paying fees in college, dining, shopping, paying bills, paying for services, online shopping, buying goods, visit

October 20 2012 at 3:35 AM Report abuse rate up rate down Reply

Bunch of damn crooks the Banking Industry is.
The REAL INTEREST RATE AT *** ZERO ** ,..but yet the avg. rate is now 14% ???
So ....just shows , much STILL after the Great Depression of `08,...are these CROOKED INSTITUTIONS that are STILL STEALING YOUR MONEY FOR PROFIT !!!
AND ,...they STILL havent learned a damn thing since the Depression of `08 !!!
Regulations HAVENT changed ,..but yet with the interest rate at ZERO for the Crooked Banks ,...they STILL have the balls to charge from 14-29% INTEREST !!!! WHAT A DAMN CROCK !!!!
Since ALL these clowns have got BAILED OUT by our own TAX DOLLARS, these crooks still have the " BALLS " to keep ripping the U.S.A. Citizen OFF !!!! ITS A CROCK AND B.S. !!!!!!!!!
ALSO ,..99% of these crooked BANKS , all had a hand of why the GREAT DEPRESSION OF `08 HAPPENED !!
Wake up people,.....DONT DO BUSINESS WITH CROOKS !!!
Credit Unions offer the SAME benefits as Banks,..under the SAME FEDERAL PROTECTION !!
Have a nice day.

October 16 2012 at 6:37 AM Report abuse rate up rate down Reply
1 reply to A.G. SESKIS's comment

Don't use a Credit card! or if you do, pay off the balance in 30 days....

October 16 2012 at 9:05 AM Report abuse rate up rate down Reply

Easy, don't use credit unless traveling. Pay cash. If you need to charge an item, its because you lack the funds to purchase the item, so skip the purchase.

October 15 2012 at 10:35 PM Report abuse +1 rate up rate down Reply

Screw the banks and switch to credit unions and pay off your credit cards at months end.

October 15 2012 at 10:14 PM Report abuse rate up rate down Reply

What really needs to be done is for people to stop charging on credit. You have to pay it back at some point..its not free. Everyone needs to learn to live with in your means You really don't need to charge anything. Sorry but that is the only way to survive this mess. You will feel better about yourself too...a nice little bonus.

October 15 2012 at 9:47 PM Report abuse rate up rate down Reply
Terry and Mandy

Even after the government bailes the banks out bankruptcy, the refuse to show any mercy for the average consumer and taxpayer. We kept them alive, so now they can make record profits off our tax dollars. Something is very wrong with this scenerio.

October 15 2012 at 1:37 PM Report abuse +2 rate up rate down Reply
1 reply to Terry and Mandy's comment

Wrong. The banks were never "given" any "tax dollars". They were encouraged, and in some cases required, to borrow from the Fed, to prevent a liquidity crisis. Almost all of those borrowed funds have been paid back with interest That's exactly how a fractional currency system is supposed to work in times times of financial upheaveal.

October 15 2012 at 8:16 PM Report abuse +1 rate up rate down Reply