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This article was last updated Jan 08, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.
What’s the average credit card APR in America today?
To find out, CompareCards by LendingTree reviewed 200 of the most popular credit cards in the country to come up with a comprehensive look at the state of credit card APRs today. We’ll do this every month and publish the results here.
In this post:
- New credit card offers: Average APR closes 2019 with another small decrease.
- Current credit card accounts: Rates drop again, thanks to the Fed.
- Historical perspective: How we got here.
- The bottom line: What this means to you and what you should do now.
New credit card offers: Average APR closes 2019 with another small decrease.
The average APR offered with a new credit card today is 20.43%, down again from last month’s 20.49% rate. As with other recent decreases, the change was driven by many major banks adjusting their offered rates to reflect recent rate reductions from the Federal Reserve. We may see a few more banks making these adjustments next month, but you shouldn’t expect them to continue much beyond that. Once all the banks are done implementing the Fed’s latest rate decreases, it’s likely that we’ll see a period of relative stability when it comes to your credit card rates. That’s how it was for several years, before the Fed started tinkering with rates, and there’s little reason to think it won’t be that way again soon, now that the Fed is likely taking a break from adjusting rates.
It’s important to know that most credit cards don’t offer just one rate to everyone. They offer a range of possible rates, based on how good or bad your credit is. The better your credit, the lower the rate you can expect, although that’s still not guaranteed as issuers take a variety of factors into consideration when approving you for a new card account.
If you have really good credit, the average APR you can expect to be offered is 16.76%.
If you have really crummy credit, the average APR offered is 24.1%.
That’s a big difference.
The good news is that the average American has a credit score of 704, according to FICO, the highest in the history of credit scoring. That means that most Americans may be more likely to qualify for that lower interest rate. For those that don’t, however, things get expensive in a hurry.
- Say you owe $5,000 on a card and pay $250 per month.
- With a rate of 24.1%, you’ll pay $1,458 in interest and take 26 months to pay it off.
- Lower the rate to 16.76% and you’ll pay just $905 in interest and take 24 months to pay it off.
That’s a savings of more than $500 in interest and two months in payoff time. Given that most Americans’ financial margin for error is tiny today, that’s a big deal.
The type of card you’re shopping for also makes a difference when it comes to what APR to expect. For example, we found that cash back cards and 0% balance transfer cards tend to have lower APRs than travel rewards cards. (That’s true even when you exclude the 0% offer.) Meanwhile, secured credit cards – cards that require a deposit to open and are typically held by folks who are new to credit or are rebuilding their credit – have the highest APRs overall.
Current credit card accounts: Rates drop again, thanks to the Fed.
Each quarter, the Federal Reserve releases data on cards that are currently in Americans’ wallets. It looks at the average interest rate for accounts that have been assessed interest – meaning those accounts that weren’t paid in full at the end of the month – as well as an average of all credit card accounts.
It’s important to make the distinction between those two because more than half of active credit cardholders carry a balance. The average APR for all accounts is just 14.87% – far lower than the 16.88% average for current cards that are accruing interest – but the other number is the most significant. After all, a credit card interest rate is a moot point if you pay your bill every month as interest never has the chance to accrue. Unfortunately, that’s not the reality for most Americans.
There is good news, however. For one, both of the above APR averages have decreased in recent months, thanks to rate reductions from the Fed. Second, we haven’t seen significant growth in recent years in the number of Americans who carry a balance. However, we haven’t seen any decline either. That’s troubling considering today’s generally strong economic conditions because if you’re carrying debt in good economic times, you’re probably not putting enough money away for if and when the economic tide turns.
Historical perspective: How we got here.
Until recently, credit card interest rates had risen steadily in recent years, hitting levels never seen in the decades-long history of the credit card business. Much of that growth has been driven by the Fed, which has also driven the recent spate of decreases.
Prior to those increases, credit card rates were largely stable for several years, following the introduction of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, better known as the Credit CARD Act. The pro-consumer law, signed by former President Obama, brought enormous change to the credit card space. It set limits on when issuers could raise cardholders’ rates, changed how payments must be applied to balances, restricted certain fees and much more. Those changes forced issuers to scramble to figure out how to recoup the revenues lost under the CARD Act, and as a result, credit card rates became volatile for several years — one card even famously featured a 79.9% APR for a short time – as banks determined what the market could bear.
Ultimately, all the changes led to overall higher credit card interest rates but relative stability, even as the nation emerged from the Great Recession. That stability lasted until the Fed began raising rates in 2015. Those hikes helped lead rates to the high levels we see today.
The bottom line: What this means to you and what you should do now.
Credit card interest rates are as high as they’ve ever been, and despite the recent Fed rate cuts, there’s no reason to believe that card APRs are going to dramatically lower any time soon. That means that you need to start knocking down your credit card debt in a big way.
As the new year approaches, resolve to make 2020 the year you commit to tackling your debt. Make a budget and stick to it. Cut costs. Start a side hustle, sell something of value that you don’t use or consider a part-time job to generate more income. Even little things can help.
You also have more power over your credit card’s APR than you realize. Here are two concrete steps you can take that can have a significant impact on your credit card’s interest rates.
Ask your issuer for a lower rate: You’d be stunned by how often this works. An April 2019 CompareCards.com survey found that 8 in 10 cardholders who asked to lower their credit card’s APR were successful and the average reduction was 6 percentage points. That’s a big deal! The problem is that just 1 in 5 cardholders asked. The best way to go about it is to find credit card offers that you would qualify for at sites like CompareCards.com or in your snail mail, and use those to frame your negotiations. Say something like, “I love my card, but it has a 24% APR and I’ve just been offered a card with an 18% APR. Will you match it?” In today’s competitive credit card marketplace, they just might.
Get a 0% balance transfer credit card: It may seem counterintuitive to fight credit card debt by getting another credit card, but these 0% offers can be a godsend. Many cards offer a 0% introductory periods of 12 to 15 months, with some even offering 18 months. If you’re knee-deep in card debt, a yearlong reprieve from interest can make a huge difference. Just make sure that before you apply, you understand all the fees, deadlines and rules associated with the card. Oh, and don’t just see the card as an excuse to spend more. Use the card wisely and it can be a big help.
For new credit card offer APRs, CompareCards by LendingTree examined the online terms and conditions for 200 credit cards from more than 50 issuers, including both banks and credit unions. To gather the data, we noted the standard purchase APRs listed for each card on each individual issuer’s or retailer’s website. (Introductory or promotional rates are not included in our averages.)
For current credit card account APRs, we used data provided from the latest G.19 consumer credit report from the Federal Reserve.