Average credit card interest rates: Week of May 25, 2022

Average card APR ticks up as lenders adjust to higher rates

Summary

The average APR for brand-new cards rose again this week, climbing to its highest point in more than two years

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The average credit card interest rate is 16.59%.

More than three weeks after the Federal Reserve’s historic half-point rate hike, the national average credit card APR sailed past another two-year-high this week, according to the CreditCards.com Weekly Credit Card Rate Report. Average rates are now 44 basis points above where they stood this time last year and are poised to keep climbing. As more lenders respond to higher federal interest rates by increasing the APRs they advertise online, the national average credit card APR is likely to move closer to 17% far sooner than previously expected.

This week, just one lender tracked by CreditCards.com – PNC Bank – adjusted interest rate offers, matching the Federal Reserve’s latest rate hike with equivalent rate increases. However, multiple lenders have already increased rates by half of a percentage point, including American Express, Citi, U.S. Bank and Wells Fargo.

Others are expected to do so soon, including Discover, Bank of America, Chase and Capital One. Although lenders aren’t technically required to revise APRs on brand-new credit cards when federal interest rates change, most do.

As a result, consumers who apply for a brand new credit card are now being offered much higher rates these days than they have likely seen in years.

Card APRs are all-but-certain to bust new records

Interest rates on most new credit card offers are already at their highest point since March 2020 when the Federal Reserve helped push rates to their lowest point in years by cutting the central bank’s influential target interest rate, the federal funds rate, by a full point and a half. Now, APRs on many new credit card offers could soon exceed pre-pandemic highs in the coming months as the Federal Reserve continues to reverse its pandemic-era emergency rate cuts with unusually aggressive increases.

Over the past few months, for example, the Federal Reserve has already increased its benchmark interest rate, the federal funds rate, by a total of 75 basis points. That’s an unusually steep climb for a benchmark rate that typically moves at a far slower pace. As a result, the U.S. prime rate has also jumped by the same amount, hitting 4% this month for the first time in more than two years.

The last time federal rates were this high was in March 2020, when the U.S. prime rate began the month at 4.75%. Now, the Fed is gearing up to push up rates by another half of a percentage point in June and is widely expected to increase rates by the same amount the following July. That, in turn, will cause lending rates nationwide to climb to their highest point since the fall of 2019 when the U.S. Prime Rate stood at 5% and average credit card interest rates hovered well above 17%. In October 2019, for example, the national average new card APR clocked in at 17.37%.

But this time around, average rates on brand-new credit cards are likely to edge closer to 18% by the time the U.S. prime rate hits 5%.

For example, the national average credit card APR is currently on track to rise as high as 17.88% or more by the time the Fed increases rates by another full percentage point. If the Fed continues pushing rates through the remainder of 2022, the average new card APR could exceed 18% by 2023.

That, in turn, would be well beyond the highest APR average that CreditCards.com has ever recorded for brand new credit cards.

For example, CreditCards.com has been tracking the APRs of a representative sample of 100 U.S. credit cards since mid-2007. The highest APR average ever recorded was 17.8%, just 1.21 percentage points above where average rates stand today. At that time, in July 2019, the U.S. prime rate stood at 5.5%, a full point-and-a-half higher than it stands today. If the prime rate was that high today, by contrast, average rates would likely come closer to 18.38%, according to CreditCards.com data.

Cards with ultra-low interest rates are quickly disappearing

Newly higher benchmark interest rates are already having a major effect on the kinds of cards new customers can find.

Among the 100 cards tracked weekly by CreditCards.com, for example, the share of new credit card offers with ultra-low APRs has fallen dramatically since March when the Fed first began increasing target interest rates in an ongoing effort to fight inflation.

In early March, for example, more than half of all cards (55 total) tracked by CreditCards.com advertised APRs under 15%, while a significant share (40 total) advertised APRs under 14%.

Now, only 40 out of 100 cards tracked weekly by CreditCards.com advertise an APR of 14.99% or less. Just 26 cards advertise an APR under 14%.

Meanwhile, the share of cards with APRs well above 17% is quickly climbing. For example, just under a quarter of cards tracked by CreditCards.com (22 total) currently advertise minimize APRs over 17%. In March, only 18 cards set their lowest possible APRs that high.

Maximum APRs are also on the rise. The average maximum APR, for example, is currently 24.10%. In March, it was 23.69%.

Now, as the Federal Reserve prepares to hike rates again in June, such high APRs are likely to become more common.

Rates will continue to climb more quickly than usual 

The Federal Reserve has made clear that it will continue hiking rates aggressively in order to curb rising inflation. For example, as noted above, it’s expected to raise rates by half a point at its next meeting and is likely to do so again at the meeting after that.

Traditionally, the Fed opts for a more gradual path to higher rates, typically increasing the federal funds rate by just a quarter of a percentage point at a time. In fact, the last time the Federal Reserve increased the federal funds rate by half of a percentage point was more than 20 years ago (when the Fed increased rates by half a point in 2000 in another effort to force down high inflation).

At that time, the decision to hike rates to rein in inflation appeared to work, with inflation falling significantly between 2000 and 2002.

Federal Reserve officials are hoping that a more aggressive monetary policy will work again this year, even though the factors driving inflation this time around are very different.

But for borrowers hoping for a reprieve from higher rates, the Fed’s ongoing rate hikes could come as an unwelcome surprise as the APRs on existing cards automatically jump in tandem with higher federal interest rates.

Why rates on new card offers are climbing

Most U.S. credit cards are tied to the U.S. prime rate, and when the federal funds rate changes, the prime rate typically changes by the same amount.

Lenders are free to set APRs on new cards as they wish and technically aren’t required to change the APRs when a card’s base rate changes. (On the other hand, lenders are required to match changes to the prime rate on open credit card accounts that are contractually tied to it.) Historically, most lenders do revise the APRs they advertise when the card’s base rate changes.

That’s what happened in the spring of 2020. After the Federal Reserve slashed rates by a point-and-a-half in March 2020 in response to economic softening from the coronavirus pandemic, nearly all of the issuers tracked weekly by CreditCards.com – with the notable exception of Capital One – lowered new card APRs as well.

Since then, most new cards included in this rate report continued to advertise the same APRs throughout the pandemic. As a result, the national average card APR hardly budged for nearly two years, remaining within rounding distance of 16% for nearly 24 months.

But now that the U.S. prime rate is up, credit card offers are following suit. Current credit cardholders will also see their rates climb, causing their debt to become much more costly to carry.

CreditCards.com’s Weekly Rate Report

RateAvg. APRLast week6 months ago
National average16.59%16.58%16.13%
Low interest13.55%13.53%12.94%
Cash back16.51%16.51%16.14%
Balance transfer14.59%14.57%13.99%
Business14.66%14.62%14.16%
Student17.07%17.07%16.78%
Airline16.04%16.04%15.46%
Rewards16.41%16.39%15.91%
Instant approval19.72%19.67%19.10%
Bad credit26.09%26.09%25.80%

Methodology: The national average credit card APR comprises 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: May 25, 2022

Historic interest rates by card type

Since 2007, CreditCards.com has calculated average rates for various credit card categories, including student cards, balance transfer cards, cash back cards and more.

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 age of your oldest credit accounts. However, even if you’re new to credit or are rebuilding your score, there are steps you can take to secure 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. Creditors also want to see that you are responsible for your credit and don’t overcharge. As a result, credit scores consider 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 successfully used 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 issuer doesn’t close it.
  • Call your issuers. If you’ve successfully owned a credit card for a long time, you may be able to convince your credit card issuers to lower your interest rate – especially if you have excellent credit. Reach out to your credit card issuer and ask if it’d be willing to negotiate a lower APR.
  • Monitor your credit report. Check your credit reports regularly to make sure you’re 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. The three credit bureaus are also providing free weekly credit reports due to the pandemic.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

Credit Card Rate Report
Reward
16.39%
Student
17.07%
Airline
16.04%
Business
14.62%
Cash Back
16.51%

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