October 31, 2018: The average credit card interest rate shattered another record this week. For the first time in at least a decade, the national average APR for new card offers hit 17.11 percent.
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Cardholders searching for a new credit cards are now seeing interest rates that are typically about a full point higher than last year.
Consumers who haven’t shopped for a new card in more than three years may be even more surprised by average card rates. The average APR in October 2015, for example, stood at just 15.01 percent – more than two points lower than where it stands now.
Interest rates are expected to keep climbing as the Federal Reserve continues to gradually increase its benchmark rate. The Fed has hiked rates by a quarter of a percent eight times since 2015, prompting most lenders to increase interest rates by the same amount.
At its most recent policymaking meeting, members of the rate-setting committee predicted the Fed would likely raise rates at least three more times by the end of 2019. If those predictions hold true, consumers shopping for a new card could see minimum rates close to 18 percent or more, on average.
Meanwhile, the average maximum card APR that issuers charge is on track to surpass 25 percent. Already, the average maximum APR for new card offers has climbed to 24.48 percent, thanks in part to general purpose cards that post APR ranges as wide as 10 percentage points or more. Many general purpose cards marketed to consumers with excellent credit now advertise maximum APRs near 25 percent.
The average median card APR – which is closer to what most cardholders are likely paying – has also reached new highs, climbing to 20.80 percent this week.
See related:Historic credit card interest rates chart
Chase hikes rates by a quarter of a percent
Chase spurred this week’s rate change by hiking the APRs it advertises online by 0.25 percent. Like most issuers, Chase increased APRs in response to the Fed’s September 2018 rate hike.
Most issuers have now increased rates by a quarter of a percent.
New cardholders aren’t the only ones seeing changes either. When the Fed raises its benchmark rate, issuers also increase rates on existing card accounts.
As a result, cardholders with balances are paying significantly more to service their debt than just a few years ago.
According to research by the American Bankers Association (ABA), the amount of interest payments banks are collecting has climbed sharply in recent years, thanks to higher rates on new and old accounts. Interest payments began rising steadily in 2016 after the Fed resumed hiking interest rates for the first time in years.
“By design, the Fed’s actions to normalize interest rates over the past few years have slowly raised the cost of credit, which will affect all borrowers” said the ABA’s Jess Sharp in an Oct. 25 news release. “This upward pressure will continue somewhat if the Fed raises rates further toward the end of this year or into next.”
According to the Fed’s latest G.19 consumer credit report, the average APR on cards that charge interest climbed to 16.46 percent in August, up from a yearly average of 13.66 percent in 2015.
More cardholders are paying off their balances in full
Not everyone’s suffering from the recent rate increases, though. As credit card interest rates continue to grow steeper, some cardholders are managing to avoid paying interest altogether by paying off their card balances in full.
According to ABA, the percentage of cardholders paying off their balances has ticked up somewhat in recent months. Just over 30 percent of cardholders paid off their credit cards in the second quarter – up 1 percent from the previous quarter.
Meanwhile, the percentage of cardholders who revolved a balance in the second quarter fell by the same amount. Fewer than 44 percent of cardholders carried a credit card balance in the second quarter, the ABA found.
CreditCards.com’s Weekly Rate Report
|Avg. APR||Last week||6 months ago|
|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.)|
|Updated: Oct. 31, 2018|