The average APR on new credit card offers dropped to 16.00% Wednesday. The average card APR is now 1.73 percentage points lower than it stood this time last year.
PNC Bank spurred this week’s rate change by revising the APR on the PNC Points Visa Business credit card in tandem with the Federal Reserve’s March rate cuts.
Small business owners applying for this business rewards credit card can now get approved for an APR as low as 10.99%, down from a previous low of 12.49%. PNC also previously cut rates on its line of personal credit cards by the same amount.
When the Federal Reserve revises its benchmark interest rate, the federal funds rate, most lenders eventually revise brand-new credit card offers by the same amount. However, some lenders are slower than others to fully incorporate changes to federal interest rates.
A minority of lenders are also choosing to leave APRs on brand-new card offers alone instead of matching federal rate changes. Capital One, for example, continues to advertise the same APRs on its line of personal credit cards that it advertised in February, even though the U.S. Prime (which is tied to the federal funds rate) has fallen to a more than four year low. It’s not clear if Capital One will choose to lower rates in the future.
See related: How do credit card APRs work?
Lenders are required to lower existing credit card customers’ APRs when the prime rate changes. However, they are free to set APRs on new credit card offers as they wish. As a result, some lenders, such as Capital One, have effectively increased interest rates on brand-new credit cards by allowing the spread between federal interest rates and the APRs they advertise to new cardholders to significantly widen.
In February 2020, for example, the difference between the Venture Rewards card’s minimum APR of 17.24% and the prime rate was 12.49 percentage points. Today, the difference is 13.99 percentage points – effectively a 1.5 percentage point interest rate hike.
Similarly, some credit card issuers have briefly matched federal rate changes, then quickly increased APRs on select cards. Not long after cutting rates by 1.5 percentage points, for example, Wells Fargo recently increased the APRs on a number of its flagship credit cards. It increased the APR on its low interest credit card, the Wells Fargo Visa Platinum card, by a full percentage point. Meanwhile, it raised the APRs on the Wells Fargo Cash Wise card and the Wells Fargo Propel Rewards credit card by half of a percentage point.
Some lenders have chosen to pull some of their lower rate cards offline altogether. For example, Bank of America recently discontinued its balance transfer card, the BankAmericard Mastercard.
As a result, the average APR for new card offers is currently just 1.8 percentage points lower than its July 2019 peak of 17.8%, even though the prime rate has fallen by 2.25 percentage points during the same period. Compared to a year ago, the average card APR is down by 1.72 percentage points.
Maximum interest rates on new credit cards have also fallen sharply in recent months, but not as dramatically as federal interest rates. The average credit card now caps rates at a maximum APR of 23.33%, according to CreditCards.com data. At the beginning of June of last year, by contrast, the average credit card advertised a maximum APR of 25.12%.
Every week, CreditCards.com compares the APRs of a representative sample of 100 U.S. credit cards. Although some lenders have been more willing than others to increase interest rates rather than cut them, a number of issuers tracked by CreditCards.com are advertising dramatically lower APRs than they’ve advertised in years.
Among the 100 cards included in the weekly rate report, for example, just 19 cards currently advertise a minimum APR above 17%. That’s a big shift from a year ago when nearly half of all cards included in the rate report – 49 cards in total – advertised a minimum APR higher than 17%. Many cards for consumers with excellent credit even charged APRs as high as 18% or more. In June 2019, for example, CreditCards.com tracked 11 travel rewards credit cards that charged minimum APRs as high 18% to 20%.
Today, by contrast, most travel rewards cards are advertising much lower APRs. As a result, the average APR for travel credit cards is currently 15.48%, down from 17.5% a year ago.
Cardholders with the best credit scores may even be able to qualify for an APR that seemed to be all-but-extinct in 2019. Among the 100 cards included in CreditCards.com’s weekly rate report, for example, 16 cards charge minimum APRs below 12%. In 2019, just five cards offered APRs that low.
- Over half of all cards tracked by CreditCards.com––53 total—offer rates below 15%––up from 21 cards a year ago.
- Five cards currently advertise minimum APRs under 10%. In June 2019, by contrast, only one card included in the weekly rate report advertised an APR under 10%.
- Credit unions that cater to members of the military and their families continue to offer some of the most competitive interest rates. For example, Navy Federal Credit Union’s Platinum card advertises a 5.99% APR. Meanwhile, Pentagon Federal Credit Union’s Gold Visa advertises an APR as low as 7.49%.
Average credit card interest rates this week
|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: June 3, 2020|
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:
- 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.
- 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.
- 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.
- 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.
- 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.