For the second week in a row, the national average card APR remained at its highest point in just over a year. And according to a fresh analysis by CreditCards.com, the average base interest rate (the spread between the U.S. prime rate and a card’s advertised APR) has climbed this year.
The average credit card interest rate is 16.15%.
The average APR for brand-new cards remained unchanged this week, according to the CreditCards.com Weekly Credit Card Rate Report. For the second week in a row, the national average card APR remained at its highest point in just over a year.
Interest rates have climbed slightly in recent months as lenders revise APRs on select cards.
Last week, for example, the energy giant Chevron hiked the APRs on its co-branded gas credit cards, the Texaco Techron Advantage Visa and the Chevron Techron Advantage Visa, by several points. New cardholders who carry a balance are now charged a 29.99% APR, which is one of the highest APRs on the market.
Meanwhile, the retailer L.L. Bean increased the APR on its co-branded store card by 1 percentage point. Earlier in the year, Barclaycard hiked the APR on the Carnival World Mastercard by the same amount.
U.S. Bank has also been unusually active in recent months, hiking APRs on a number of its credit cards, including the Harley Davidson Visa card, the U.S. Bank Secured card and the U.S. Bank Visa Platinum card.
However, most lenders tracked by CreditCards.com have left card APRs unchanged since last spring. As a result, the average new card APR has remained within rounding distance of 16% all year.
A year ago today, for example, the national average credit card APR registered at 16.14%, just one basis point below where it stands today. Two years ago today, by contrast, the average card APR stood at 17.68% – a 1.53-percentage-point difference.
See related: How do credit card APRs work?
Despite lower APRs, the average net interest rate is up again this year
Every week, CreditCards.com tracks the APRs on a representative sample of 100 U.S. credit cards. Currently, average card APRs are just shy of their lowest point since 2017.
But according to a fresh analysis by CreditCards.com, the average base interest rate (which is the spread between the U.S. prime rate and a card’s advertised APR) has actually climbed this year.
In fact, the difference between the national average credit card APR and the prime rate is currently higher than it has been at any other time since CreditCards.com began tracking rates in mid-2007 (excluding last spring when lenders’ rates were still stabilizing).
For example: The spread between the average card APR and the prime rate is currently 12.9 percentage points. A year ago, it was 12.89 percentage points. Right before the pandemic prompted a wave of interest rate cuts across the country, the difference between the average card APR and the prime rate was 12.6 percentage points.
See related: How to lower your credit card interest rate
Some issuers chose not to follow the Fed’s rate cuts
This year’s higher average rate spread appears to be due in part to some lenders’ decision not to fully match last year’s emergency rate cuts.
When the Federal Reserve slashed rates by a point and a half last year, prompting the prime rate to also fall, most lenders trimmed APRs on new credit cards by the same amount. That caused the national average credit card APR to fall to its lowest point in years.
But when federal interest rates fall, rate cuts on new offers aren’t always guaranteed. In fact, lenders technically don’t have to revise the APRs they advertise at all, even if a card’s benchmark rate has dropped significantly. (Lenders do have to revise APRs on open credit card accounts, though.)
As a result, some lenders, such as Capital One, chose not to cut rates on their consumer cards last year, despite dramatically lower federal rates. That caused the spread between Capital One cards and the prime rate to substantially increase. A number of lenders also reversed some of their rate cuts on selected cards. That, in turn, increased the rate spread on those cards as well.
As a result, multiple cards included in CreditCards.com’s Weekly Credit Card Rate Report now charge significantly higher net interest rates than they charged before the pandemic, even in cases when they charge lower APRs overall.
This year’s increase in net rates follows a trend that CreditCards.com has observed for years.
According to CreditCards.com data, for example, the average net interest rate for new credit card offers has increased every year since at least 2015. For example:
- Two years ago, the difference between the average new card APR and the prime rate was 12.18 percentage points – despite a significantly higher APR.
- Three years ago, the spread was even smaller. In July 2019, for example, the national average credit card APR hit an all-time record high of 17.8%. But the difference between the U.S. prime rate and the average credit card interest rate was just 12.3 percentage points – a more than half-point difference from today.
- Before 2009, net rates on new card offers were especially low by today’s standards. For example, the average card APR in April 2008 was 11.11%, while the U.S. prime rate was 5.25%.
- The difference was even more extreme in 2007. In June 2007, for example, the first average new card APR that CreditCards.com ever recorded was 13.15% – around three points lower than the average card APR today. But benchmark rates were much higher than they are today. For example, the prime rate was 8.25% in June 2007 – just 4.9 points lower than the national average card APR during the same period.
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: April 14, 2021|
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.