Average Credit Card Interest Rates Declined in October
APRs and card balances fall as peak holiday shopping season approaches
The average credit card interest rate is 21.44%, according to data collected by Pracekladno in September and early October.
That rate is steep, despite the fact that annual percentage rates (APRs) offered by the major credit card companies recently slid 0.25 percentage points in response to rate cuts by the Federal Reserve.
While this means you may see lower finance charges on your existing credit card debt, don’t jump to the wrong conclusion when you hear about lower interest rates or “cheaper” debt. Carrying a credit card balance is still extremely expensive.
- The average APR on credit card purchases is 21.44%.
- Store credit cards have the highest average interest rate.
- Business credit cards have the lowest average interest rate.
- Cash-back credit cards have the lowest average interest rate among consumer cards.
Average Credit Card Interest Rates (APR) on Purchases by Card Category
|All Credit Cards||21.44%|
|Business Credit Cards||19.93%|
|Cash-Back Credit Cards||20.20%|
|Student Credit Cards||20.68%|
|Travel Rewards Credit Cards||20.74%|
|Secured Credit Cards||20.84%|
|Store Credit Cards||25.71%|
How We Categorize Cards
We assign a category to each credit card in our database, and a card can go in only one category. Here's how we define them:
- Business credit cards: Cards small business owners can apply for and use to make purchases for their companies.
- Cash-back credit cards: Cards that offer you a little rebate on most purchases you make with the card.
- Student credit cards: Cards for college or graduate students who are at least 18 years old.
- Travel rewards credit cards: Cards that allow you to earn points or miles on travel purchases, either with specific travel brands or on a variety of travel-related expenses.
- Secured credit cards: Cards that require a security deposit that’s usually the same amount as the credit limit you’ll be given. These cards are aimed at helping people with poor credit or no credit history to build credit.
- Other: Cards that do not fit any of the following categories: business, cash back, student, travel, secured, and store. This includes cards that offer very few—if any—features.
- Store credit cards: Cards you can use at particular retail stores, and sometimes other places as well. They often offer discounts or rewards for purchases made at the associated store (or chain of stores).
Card type is just one of the things that determines a credit card interest rate. The other main factors are the kind of transaction you use the card for (more on that below) and your credit standing.
A credit card issuer often has a range of APRs it might charge on a certain card. The better your credit score, the more likely you are to get approved for an interest rate on the lower end of the range, and vice versa.
Other Notable Rates
- The average purchase APR among all rewards cards (travel and cash-back) is 20.46%.
- For cards marketed to people with bad or fair credit scores (a FICO score below 670), the average purchase APR is 24.72%.
- In contrast, the average purchase APR for cards marketed to people with good to excellent credit scores (670 or higher on the FICO scale) is 20.45%.
Average Interest Rates by Credit Card Transaction Type
There are three main transaction types credit cards commonly offer: purchases, balance transfers, and cash advances. Many credit cards also give new cardholders a break by offering low or 0% interest rates on certain transactions for a limited time.
Purchase APR Deals
One-fifth of the cards tracked for this report offer new cardholders limited-time promotional purchase APRs, such as 0% for 15 months.
- On average, these deals last about 12 months.
- The longest purchase rate offer is 18 months, available on both the Citi Diamond Preferred Credit Card and the Wells Fargo Platinum Visa Card.
- Cards with promotional APRs on purchases charge an average ongoing rate of 19.62%.
Balance Transfer APR Deals
Promotional balance transfer rates are slightly more common than purchase APR deals right now. More than a quarter of all our tracked cards offer introductory balance transfer rates.
- The average length of these balance transfer rate promotions is about 14 months.
- The longest offer, touted by the Citi Simplicity credit card, gives you 21 months to pay off transferred debt interest-free.
- Once promotional rate offers end, we found the average APR of balance transfer transactions is 19.62%.
Cash Advance Rates
Most credit cards allow you to tap the credit line by using the card to withdraw cash at an ATM.
- 83% of cards we track allow cash advances.
- The average APR on cash advances is 26.42%.
- The highest cash advance APR we found in our analysis is 36%, charged by both the Fortiva Credit Card and First Premier Bank Gold Mastercard.
These transactions carry hefty fees and start accruing interest immediately, so avoid making them if at all possible.
Penalty Interest Rates
If you fall seriously behind on your credit card payments, exceed your credit limit, or your bank returns a card payment, the card issuer may increase your standard purchase APR to the penalty interest rate. The penalty rate (which may also be called the default rate) is the highest interest rate card issuers charge.
Now, not all cards charge penalty rates, but many do, including 87 of the cards surveyed for this report. Based on our sample of cards, the average penalty APR is a hefty 28.92%. The highest penalty rate in our database is 31.99%, charged by HSBC Cash Rewards Mastercard.
Fortunately, if you successfully pay your bill on time each month you won’t have to worry about a penalty interest rate.
Seasonal Rate Focus: Store Credit Cards
While shopping online and in stores over the next few months, you’ll probably get inundated with advertisements for retail credit cards. These ads will tease discounts or extra rewards for opening an account. Amid the tempting offers, take note of store card interest rates. Store cards are often easy to get but can cost you big time.
Based on our data, the average retail credit card rate is 4.27 percentage points above the national average for all credit cards. Many retail credit card APRs are close to the 30% mark, even after the two rate decreases by the Federal Reserve (more on that below).
The highest store card interest rate Pracekladno tracks is a hefty 30.24%, charged by the Goodyear Credit Card from Citi. Interest rates that high are more like penalty rates than standard purchase rates.
Why Rates Are Declining
Most credit card interest rates are variable, which means they are subject to increase or decrease based on the federal funds rate, a baseline interest rate controlled by the Federal Reserve that impacts many financial products, such as student loans, mortgages, auto loans, and credit cards.
When the Federal Reserve makes rate changes, banks can adjust the interest rates tied to that important little number accordingly. Between Sept. 1 and Oct. 9, 2019, Pracekladno found 18 card issuers lowered credit card interest rates: American Express, Bank of America, Barclays, Capital One, Celtic Bank, Chase, Citi, Commerce Bank, Credit One, Discover, Elan Financial Services, Goldman Sachs, Luxury Card, Pentagon Federal Credit Union, USAA, US Bank, Web Bank, and Wells Fargo.
The rate changes by banks were a consistent (and small) 0.25 percentage-point decrease, in line with the Sept. 19 federal funds rate cut aimed at stimulating the economy. Pracekladno’s average credit card interest statistics were calculated after that adjustment.
The Fed lowered interest rates because of concerns about slowing economic growth. This was the second 25 basis-point rate cut in 2019, the first of which was announced on Aug. 1. Until this year, the federal funds rate slowly increased as the U.S. economy recovered from the financial crisis that started in 2007.
Meanwhile, Card Balances Are Rising
Even before interest rates started decreasing, cardholders were spending left and right—and carrying card debt. The U.S. revolving debt balance (which refers primarily to credit card debt) reached an all-time high in July: $1.080 trillion. While consumers slowed their debt accumulation a tad in August to $1.078 trillion, that's still the second-highest level on record.
How We Calculate Average Rates vs. the Fed
We look at interest rates by card category and transaction type to give a clearer view of the interest rate you can expect to pay based on the kind of card you're using or how you plan to use it.
For comparison, the latest data from the Federal Reserve puts the average credit card APR at 15.10%. However, the Fed calculates its rate based on voluntary reporting from 50 credit-card-issuing banks, and it's unclear what goes into those averages or what types of cards make up those averages.
The Fed also reports an average rate on accounts charged interest (meaning those that carry balances month-to-month), though its calculation gives more weight to accounts with high balances. In the third quarter of 2019, the average interest rate on credit cards accruing finance charges was 16.97%, down from a record high 17.14% reported in the second quarter.
What APR Means For You
If you are used to paying off your credit card balances in full each month, this news doesn’t affect you at all. However, if you regularly carry a balance from month to month, credit card interest rates and their fluctuations are very important numbers to keep track of.
When credit card interest rates go down, the cost of your debt goes down, too—though the most recent rate cuts are so small that you likely won’t feel them much. “You can probably expect to see a tiny cost difference, but it's not a huge cut by any means,” says Erika Rasure, financial education consultant and assistant professor of business and financial services at Maryville University. “Besides, saving money on debt is basically an oxymoron.”
While lower rates might make it feel more acceptable to carry card debt, spend with caution. Focus on reducing or eliminating credit card debt instead. “Additionally, the rate could rise once again and make paying off your debt even more challenging,” warns financial attorney Leslie H. Tayne, founder and managing director of Tayne Law Group, a New York law firm focused on debt resolution.
Credit card issuers don’t have to notify you when interest rates are variable and adjusted based on an index, as credit card rates are. That’s true whether the change is an increase or decrease. You have to watch your monthly statements to keep tabs on the cost of carrying credit card debt.
This monthly report is based on credit card offer data collected and monitored on a rolling basis by Pracekladno for 247 U.S. credit cards Sept. 1-Oct. 9, 2019. Our data pool includes offers from 37 issuers, including the largest national banks. We track average interest rates on both a weekly and monthly basis for each card category, the overall average rate for all cards.
How We Calculate APR Averages
We gather purchase and transaction APR information from current credit card terms and conditions. If a credit card APR is posted as a range, we first determine the average of that range, then use that number in our overall average rate calculations, so the statistics are true averages, not skewed toward the low or high end of a spectrum.
The overall average APR in this report is an average of the average APR in each category we track: travel, cash back, secured, business, student, and store cards.
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