Rate survey: Average card rate climbs to record high of 16.96 percent

Kelly Dilworth
Personal finance writer
Specializing in new trends in credit

CreditCards.com Weekly Credit Card Rate Report

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The average credit card interest rate settled at a record high Wednesday after another major issuer increased APRs by a quarter of a percent.

Just over a month after the Federal Reserve increased its benchmark interest rate, Chase matched the Fed’s rate change on its cards.

Chase’s across-the-board rate hikes helped push the national average APR to an all-time high of 16.96 percent, according to CreditCards.com’s Weekly Credit Card Rate Report.

For this week’s rate report, CreditCards.com reviewed the APRs, promotional terms and annual fees of 100 U.S. credit cards.

Chase is one of the last major issuers to match the Fed’s June 2018 rate hike. Over the past month, American Express, Citi, Bank of America, Discover, Capital One, Wells Fargo, U.S. Bank, USAA and Barclaycard have all increased APRs by 0.25 percent.

The regional bank TD Bank increased rates by a quarter of a percent this week as well. It joined several other smaller banks that have also hiked rates in recent weeks, including PNC, Regions, SunTrust, Key Bank, Comerica and Huntington. 

Issuers reluctant to freeze or cut rates

The ongoing rate hikes have made borrowing significantly more expensive for credit card holders – particularly for those who can only afford to pay the minimum amount due. A 1-point rate increase, for example, could cause a borrower who owes $5,000 on a card with a 17 percent APR to pay more than $400 in additional interest over time.

As average rates continue to break records, some borrowers may wonder if issuers will eventually cut rates or, at the very least, refrain from increasing them further. But so far, most issuers appear to have no plans to decrease rates or freeze them.

Although issuers aren’t required to increase rates when the Fed does, most issuers have responded to the rate hikes by matching every rate change. As a result, credit card APRs have climbed sharply in recent years after staying within rounding distance of 15 percent for more than five years.

In 2013, for example, the national average APR stood at 14.96 percent, according to CreditCards.com data. Two years later, it had hardly budged, clocking in at 15 percent.

It wasn’t until late 2015, when the Fed began hiking rates after a years-long pause, that interest rates began to climb. Since then, the average card APR has swung from 14.99 percent in December 2015 to nearly 17 percent today.

Some analysts have predicted that as interest rates rise on the majority of U.S. cards, a handful of lenders will begin cutting rates to set themselves apart. But so far, that mostly hasn’t come to pass. For example, nearly all the cards monitored by CreditCards.com have largely left rates alone, except when matching the Fed’s rate increases.

One issuer, Navy Federal Credit Union, said it cut rates on select cards in July 2017 after it saw other issuers increasing rates in tandem with the Federal Reserve. But no other issuers tracked by CreditCards.com have made a similar gamble. As a result, the national average APR for new card offers hasn’t declined once since January 1.

Fed chairman: Rates are highly like to keep rising

Fed Chairman Jerome Powell confirmed to Congress on July 17 that the rate-setting Federal Open Market Committee (FOMC) plans to keep increasing the federal funds rate.

“With a strong job market, inflation close to our objective and the risks to the outlook roughly balanced, the FOMC believes that – for now – the best way forward is to keep gradually raising the federal funds rate,” said Powell in testimony before Congress.

The Fed could change course if the economy starts to falter. It first cut rates to near zero in 2008 to help stimulate the economy and encourage people to borrow. As the economy has strengthened, the Fed has slowly increased interest rates.

“It is difficult to predict the ultimate outcome of current discussions over trade policy as well as the size and timing of the economic effects of the recent changes in fiscal policy,” Powell said in his testimony. But, “overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate.”

What that means for consumers: Interest rates on credit cards and other variable rate loans will almost certainly keep going up, forcing borrowers to pay much more than they used to pay to carry a credit card balance. 

See related: Historical credit card rates, 2007-2018

CreditCards.com's Weekly Rate Report

  Avg. APR Last week 6 months ago
National average 16.96% 16.93%
Low interest 13.85%
13.83% 13.09%
Cash back 17.19%
Balance transfer 16.21%
Business 14.59%
Student 16.48%
Airline 16.91%
Rewards 17.03%
Instant approval 19.22%
Bad credit 23.90%
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: July 18, 2018

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Updated: 03-21-2019