What is the average credit card interest rate?

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Credit card debt can be a heavy burden, especially when interest rates are soaring. According to Federal Reserve data, the average credit card annual percentage rate (APR) climbed to over 21% in 2024. This rate makes it more challenging than ever for Americans to pay down their balances in the face of rising everyday costs.

With these costs in mind, it's crucial to understand your credit card terms. In some cases, you might be able to reduce your interest rate or better manage your payments to avoid racking up more debt.

Average credit card interest rate

The latest data from the Federal Reserve shows that the average credit card interest rate has reached 21.59% across all account types. This rate has steadily climbed over the last few years, keeping pace with inflation. 

Callie Cox, chief market strategist at Ritholtz Wealth Management, says, "Credit card rates are usually high, but after a series of steep rate increases, they're much higher than at any time in recent history. Inflation has intensified the financial struggles of many households, and those relying on credit cards are now getting penalized even more."

Understanding these high rates is crucial for anyone with a credit card balance. Failing to pay off your full statement balance each month means you'll be charged interest based on your card's APR. And with rates north of 20%, those interest charges can add up fast, making it harder to get out of debt.

Interest rates by card type 

Average credit card interest rates can vary depending on the type of card. Here's a quick overview:

• Rewards credit cards: Rewards cards frequently have higher interest rates to counterbalance the value of the rewards they offer, like cash back or travel points.
• Secured cards: Card issuers charge higher APRs on secured cards due to the increased risk associated with subprime credit scores. These cards often require a security deposit and aim to help users build or repair credit over time.
• Retail cards: Also known as store cards, these usually have some of the highest interest rates around.
• Low-interest credit cards: As the name suggests, low-interest credit cards sport lower-than-average APRs. These cards are a smart choice if you occasionally need to carry a balance.

How do credit card APRs work? 

When it comes to credit card APRs, there's more than meets the eye. Let's break down the different types:

• Purchase APRs: This is the interest rate you're charged on new purchases if you carry a balance from month to month instead of paying your bill in full. It's the most common APR.
• Balance transfer APRs: If you move a balance from one credit card to another, this is the interest rate that will apply to the transferred amount. Some cards have promotional balance transfer offers with low or 0% APRs for a set period.
• Cash advance APRs: Withdrawing cash from an ATM or bank using your credit card is considered a cash advance. Cash advances usually have a higher APR than regular purchases and start accruing interest immediately with no grace period.
• Penalty APRs: If you miss a payment or make a late payment, some credit card companies may penalize you with a higher interest rate on future transactions. Not all cards have penalty APRs, though.

When you see references to average credit card interest rates, those figures are typically talking about purchase APRs. Many credit cards also have a range of potential APRs; the specific rate you get depends on your credit history and score.

Andrea Woroch, a money-saving expert, explains, "Some cards have a range of APR when applying, but this number will depend on your actual credit score. Consumers with excellent credit will secure the lowest possible rate.”

How credit card interest rates are determined

Don't assume your credit card's APR will stay the same forever. The vast majority of cards have variable interest rates, meaning they can change over time. Here's why:

Most credit card APRs are tied to the federal prime rate. Your card's interest rate is determined by adding a certain percentage to the prime rate. So when the prime rate increases or decreases, your APR will head in the same direction.

The nation's prime rate doesn't move at random, though. It's directly impacted by the federal funds rate, which is set by the Federal Reserve. The Fed adjusts this key lending rate up or down in response to the country's economic conditions. During times of high inflation, the Fed tends to hike rates to try to slow rising prices.

So if you've noticed your card's interest rate creeping up over the past year or so, you can blame record-high inflation. To combat rising consumer prices, the Federal Reserve has increased the federal funds rate by 5 percentage points since March 2022. In turn, this has led to spiking credit card interest rates.

How to find your credit card interest rate 

It pays to know what interest rate your credit card issuer is charging you. If you're not careful, a high APR can lead to expensive debt.

"It's the most important number to pay attention to when you're applying for a new credit card, and credit card companies are legally obligated to disclose it. Make sure to read the terms and conditions of any debt you take out," advises Cox from Ritholtz. Your card's terms and conditions should be easily accessible on the issuer's website or app.

When reviewing your card agreement, look for the Schumer box. Named for Senator Chuck Schumer, who championed the law requiring it, this standardized disclosure clearly lists a credit card's interest rates and fees. In the Schumer box, you'll find your purchase APR, balance transfer APR, cash advance APR, and any promotional rates you may qualify for.

"This box highlights essential information in an easy-to-read format and details interest rates and fees, such as APR, balance transfer, and foreign transaction fees. Reviewing this box to understand variable APRs, zero-percent interest periods, and other financial implications is crucial," says certified financial planner Ohan Kayikchyan.

Lowering your credit card interest rate

Just because your credit card has a high interest rate now doesn't mean you're stuck with it forever. There are a few strategies you can use to potentially lower your card’s interest rate:

1. Negotiate with your card issuer: It doesn't hurt to ask your credit card company for a reduced interest rate, especially if you've been a loyal customer who always pays on time. There are no guarantees, but some issuers may be willing to work with you.
2. Consider a balance transfer credit card: If you're carrying expensive debt, consider cards with promotional balance transfer offers. These offers typically provide a reduced rate for anywhere from 12 to 21 months. Just be aware that most balance transfer offers charge an upfront fee of 3% to 5% of the transferred balance.
3. Aim to pay in full: Want to avoid credit card interest altogether? Woroch says your best bet is to pay your entire statement balance by the due date each month. "Paying interest on your balance makes everything you bought that much more expensive. Get in the habit of paying your balance off in full before the payment due date to avoid paying interest."
4. Follow a budget: Of course, paying in full is easier said than done if you're charging more than you can afford. "It's really important to set and follow a budget to ensure you aren't buying more than you can afford to pay off in full," Woroch notes.
5. Consider a low-interest credit card: If you frequently need to carry a balance from month to month, it may be worth switching to a credit card with a lower ongoing APR. Just make sure you have a plan to pay off the debt as quickly as possible.
6. Work on raising your credit score: In the long run, boosting your credit score can help you qualify for better rates on new credit cards. It may also give you leverage to convince your current card issuers to lower your interest rate.

The bottom line

With average credit card rates topping 21%, carrying a balance from month to month is more expensive than ever. If you want to avoid drowning in high-interest debt, it's critical to understand how your card's APR works and do your best to pay your bill in full each month.

If you’re already struggling with debt, consider balance transfer offers or reaching out to your issuer to request a lower rate. Most importantly, remember to use your credit cards responsibly moving forward. With a little planning and discipline, you can enjoy your card's purchasing power and rewards without the burden of expensive interest payments.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.