Average credit card interest rates: Week of August 23, 2023

The average credit card interest rate is 21.05 percent.

Never before have so many popular credit card offers started APRs above 21 percent. According to CreditCards.com’s latest Weekly Rate Report:

• 33 out of 100 cards now start APRs at 21.24 percent or higher, including several leading travel and rewards credit cards.
• More than half — 51 out of 100 online credit card offers — start APRs above 20 percent.
• More than two-thirds start APRs above 18 percent.

That’s a striking change from 15 months ago when credit card APRs first began to climb. Just before the Federal Reserve began its historic campaign to curb inflation with sharply higher interest rates, only 16 out of 100 online card offers started APRs above 20 percent.

Instead, in March 2022:

• Most offers tracked by CreditCards.com — 77 out of 100 online credit card offers — started APRs somewhere below 16 percent.
• Just over half offered rates under 15 percent.

Today, by contrast, only three out of 100 cards offer rates that low.

Meanwhile, a record number of credit card offers have set even higher floors for interest rates this summer.

Among the cards tracked weekly by CreditCards.com:

• 20 out of 100 online credit card offers now start APRs well above 22 percent.
• 17 out of 100 offers advertise starting APRs above 24 percent.
• Some credit-building and store cards have even crossed the 30 percent threshold this year, with nine out of 100 cards now starting APRs at 30.24 percent or higher.

Although lenders don’t have to push up APRs on brand-new credit cards when federal rates increase, historically, most do.

But as APRs for both new and existing card accounts continue to break records, evidence is emerging that a growing share of cardholders can ill-afford this year’s rising rates.

As card balances hit an all-time high, more cardholders are falling behind on bills

Squeezed between historically high borrowing costs and persistently high consumer prices, a growing number of credit card holders are showing signs of financial distress.

On Tuesday the nationwide retailer Macy’s said that an unusual surge in credit card delinquencies — late payments by 30 days or more — took a bite out of revenues this spring and summer, surprising executives who expected a more modest uptick. “The speed at which the increase occurred for the company and the broader credit card industry since the company’s first quarter earnings call was faster than expected,” said Macy’s in a news release.

Like many retail chains, Macy’s offers a co-branded store card with an above-average APR. The Macy’s American Express card currently offers a single interest rate of 31.99 percent.

Macy’s CFO Adrian Mitchell said in an earnings call that consumers appear to be feeling “increased pressure” from inflation and other macroeconomic trends, making it harder for them to keep up with their bills. But with student loan payments set to resume for millions this fall, some cardholders are likely to feel even more financial stress in the coming months.

“The expiration of student loan forgiveness beginning in October, higher rate levels and lower new job creation are all new pressures on the consumer,” said Mitchell.

According to a July survey by financial services company Empower, 1 in 3 households expect to spend as much as $1,000 a month on student loan payments this year, putting heavy pressure on their budgets. As a result, nearly a third plan to rely more heavily on cards to help pay for expenses.

Analysts at Wells Fargo also released a research note this week highlighting an uptick in credit card delinquencies at a range of banks, especially small to mid-sized ones, as borrowers struggle to keep up with growing expenses. “The economy still has a cash cushion. But many consumers are exhausting their credit, while income growth has slowed sharply,” wrote analysts.

Meanwhile, research released this month by the Federal Reserve Bank of New York found that delinquency rates for U.S. cards returned to pre-pandemic levels in the second quarter as cardholders ran up bigger balances.

During that same period, Americans’ collective credit card debt also swelled past $1 trillion for the first time on record, potentially foreshadowing future delinquencies.

In a blog post accompanying the New York Fed’s latest Household Debt and Credit Report, researchers said that Americans’ overall financial health still appeared to be relatively strong for now.

“Despite the many headwinds American consumers have faced over the last year — higher interest rates, post-pandemic inflationary pressures, and the recent banking failures there is little evidence of widespread financial distress for consumers,” wrote researchers.

But as debt pressures grow for a wider range of borrowers, the share of cardholders falling further behind on payments could pick up later this year. “Rising balances may present challenges for some borrowers and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers.”

According to a separate report released this month by TransUnion, Americans’ individual card balances are also on the rise, climbing to a 10-year high earlier this year. As a result, cardholders’ minimum required payments are also increasing.

Why interest rates are climbing

Most U.S. credit cards are tied to the 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 issuers do revise the APRs they advertise when the card’s base rate changes.

That’s what happened in the spring of 2020. After the Fed slashed rates by a point and a half in March 2020 in response to economic softening from the 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 a rounding distance of 16.00 percent for nearly 24 months.

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

CreditCards.com’s Weekly Rate Report

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: August 23, 2023

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 percent 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. Contact your credit card issuer and try to negotiate a lower APR.
• Monitor your credit report. Check your credit reports regularly to be 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 through 2023 due to the pandemic.