Average Credit Card Interest Rate Drops to 20.15%
The average credit card interest rate has fallen to 20.15%, according to data collected by The Balance in April 2020.
The Balance watched more annual percentage rate (APR) cuts roll in throughout April as credit card issuers caught up with emergency rate changes issued by the Federal Reserve in March.
The rate cuts were made to help companies more affordably borrow emergency funds during the coronavirus pandemic, but the changes have affected credit card interest rates, too. However, while average interest rates have sunk even lower, credit card APRs in general are still quite high, as is the national credit card debt balance.
The average APR on credit card purchases is 20.15%, down 1.06 percentage points since February.
Store credit cards have the highest average interest rate.
Business credit cards have the lowest average interest rate.
Student credit cards have the lowest average interest rate among consumer cards.
Average Credit Card Interest Rates (APR) on Purchases by Card Category
Card type is just one factor that determines a credit card interest rate. To learn how The Balance categorizes cards based on type for this report, check out the methodology at the bottom of this page. Other deciding factors include your credit standing and the type of transaction you use the card for (more on that later in the “Average Interest Rates by Credit Card Transaction Type” section).
Average Credit Card Interest Rates Based on Card Type
Current Average APR Last Month 3 Months Ago
All Credit Cards 20.15% 20.71% 21.28%
Business Credit Cards 17.99% 18.51% 19.14%
Student Credit Cards 18.87% 19.69% 20.61%
Cash-Back Credit Cards 19.21% 19.75% 20.25%
Secured Cards 20.03% 20.53% 20.97%
Travel Rewards Credit Cards 20.10% 20.61% 21.23%
Other 20.62% 21.14% 21.61%
Store Credit Cards 24.23% 24.73% 25.25%
A credit card issuer often has a range of APRs it might charge on a certain card, such as 15.99% to 23.99%. The better your credit score, the more likely you are to get approved for an interest rate on the lower end of the range, and vice versa.
What Has Happened: Card Issuers Make More Changes During COVID-19
The Balance has observed a number of interest rate and card offer changes over the past month as the pandemic continues to impact all areas of the economy, including credit cards.
More Interest Rate Cuts
The Federal Reserve made two emergency cuts to the federal funds rate back in March, driving its benchmark rate down 1.5 percentage points within just a few weeks. The fed funds rate—which drives the prime rate most credit card APRs are based on—is now resting at a 0%-0.25% range.1
Shortly after the Fed actions, more than a dozen credit card issuers lowered card interest rates. The Balance expected even more issuers to respond in April and that’s exactly what happened, which made average APR figures sink even lower.
Since the Fed’s first rate cut on March 3, 25 credit card issuers have lowered interest rates—13 in March and 12 in April: American Express, Banco Popular, Bank of America, Barclays, Capital One, Celtic Bank, Citi, Chase, Commerce Bank, Discover, DSRM National Bank, Elan Financial, Goldman Sachs, HSBC, Luxury Card, Merrick Bank, PNC, Sallie Mae Bank, Simmons Bank, State Farm Bank, SunTrust, USAA, U.S. Bank, WebBank, and Wells Fargo.
When credit card APRs go up or down because of movement in benchmarks they’re based on (such as the prime rate), banks don’t have to notify cardholders of the changes.2 Because credit card interest rates are often variable, watch your monthly statements to keep tabs on the cost of carrying debt.
Card rates should stabilize over the next few weeks, since the Federal Reserve voted to abstain from another fed funds rate change on April 29. The Fed wants to hold the current benchmark range steady until the economy starts to regain strength.3
Card Balances Are Sky-High, But Spending Has Slowed
Additional interest rate cuts may be welcome news for consumers, who are collectively carrying a huge amount of credit card debt.
The U.S. revolving debt balance (which refers primarily to credit card debt) is now $1.066 trillion, according to the latest G.19 consumer credit report. Although that’s down from a near-record high of $1.094 trillion in February, it’s still very high by historical standards.4
The $28 million decline in March is likely due to a very quick—and steep—drop in consumer spending as the coronavirus pandemic quickly changed how people were working and using money around the U.S. The latest report on consumer income and spending from the Bureau of Economic Analysis shows spending dropped a whopping 7.5% in March.5
“Those are numbers that usually only move a tenth of a percentage point, so this was monumental,” explained Scott Hoyt, senior director of consumer economic research at Moody’s Analytics.
This is just the start of data showing how consumer behavior changed as a result of COVID-19, too. “I think everybody is expecting April to be the worst,” Hoyt added. “We are expecting another large decline in consumer spending, and that should take consumer credit down with it.”
This is not to say that consumers aren’t still using (or relying on) credit cards, though. As unemployment numbers continue to climb, credit cards may be used to cover living expenses.
“We are in the throes of a deep recession and consumers are suffering really badly,” Hoyt said. “The fact that [more than] 33 million filed for unemployment insurance means that many people have had a significant hit to their income. The hope is that when things reopen, the jobs will come back, but time will tell.”
It’s also too soon to tell whether or not consumers will be able to manage card balances, though, as many credit card issuers are offering forbearance options this summer. Hoyt said credit card delinquency data won’t start to show the repercussions of COVID-19 until late fall or early winter.
Balance Transfer Offers Are Quietly Changing
The Balance has watched several card issuers amend 0% balance transfer APR deals over the past month. In fact, promotional balance transfer offer advertisements are less prominent overall.
For example, Bank of America removed mentions of balance transfer promotional APRs from its marketing materials, although the offers are still visible in the card terms and conditions posted online. U.S. Bank did the same thing for the U.S. Bank Visa Platinum card, and Chase did the same for the Chase Freedom card.
And in a couple cases, 0% balance transfer APR deals just aren’t available for new cardholders anymore. Both the Capital One SavorOne Rewards Card and the Capital One Quicksilver Cash Rewards Card no longer offer 0% balance transfer APR deals, just 0% on purchases for 15 months. Chase has also temporarily suspended online applications for its Slate card, which was known for boasting a generous balance transfer offer.
Just as you may be concerned about finances right now, so are banks. As a result, some issuers are avoiding taking on extra financial risk in the form of large consumer balances that may not be repaid, according to David Shipper, a senior analyst for market research firm Aite Group.
“It’s all about being careful,” he explains. “Many cardholders are requesting payment deferrals, after all. Banks are putting those offers on the back burner so that they are available, but not nearly as prominent. They are also pulling back on advertisements for new cardholder accounts and mail offers.”
Average Interest Rates by Credit Card Transaction Type
Let’s dive deeper into interest rates. There are three main transaction types credit cards commonly offer: purchases, balance transfers, and cash advances. APRs often vary depending on which of those transactions you make, and some issuers give new cardholders a break by offering low or 0% interest rates on some of those transactions for a limited time.
Purchase APR Deals
If you want to finance a large purchase with a new credit card, finding a card that offers a promotional purchase APR (such as 0% for 15 months) is still pretty easy. More than one-quarter of the cards we track for this report are offering new cardholders introductory purchase APRs.
On average, these offers last about 12 months.
The longest introductory purchase rate offer is 20 months, which is offered by two cards in our database: U.S. Bank Visa Platinum Card and U.S. Bank Business Platinum Card.
Cards with promotional purchase APRs charge an average ongoing rate of 18.03%.
Balance Transfer APR Deals
Moving debt from a high-APR credit card to one with a lower or limited-time 0% APR on balance transfers can reduce interest costs and help you pay down debt faster. Promotional balance transfer rates are slightly more common than purchase APR deals right now, despite the offer changes observed by The Balance in April. Nearly one-third of all our tracked cards boast balance transfer rate offers.
The average length of these balance transfer rate promotions is about 14 months.
The longest offer, touted by the SunTrust Prime Rewards Credit Card, gives you 36 months to pay off transferred debt at a reduced interest rate of 3.25%. The best 0% balance transfer APR offer is 21 months long, offered by the Citi Simplicity card and Citi Diamond Preferred Credit Card.
When promotional rate offers end, we found the average APR of balance transfer transactions is 18.03%.
Cash Advance Rates
Most cards allow you to tap your credit line by using the card to withdraw cash at an ATM, but that convenient feature will cost you. About 89% of the cards we track allow cash advances.
The average APR on cash advances is currently 25.36%.
The highest cash advance APR we found is still 36%. That steep cash advance APR is charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.
On top of steep APRs, cash advance transactions usually come with extra fees and start accruing interest immediately, so avoid making them as much as possible, especially if you are trying to minimize extra costs during this uncertain time.
Penalty Interest Rates
If you fall seriously behind on your monthly credit card payments, exceed your credit limit, or if your bank returns a monthly payment, your standard purchase APR may be raised to the penalty interest rate. The penalty rate (also called the default rate) is the highest interest rate card issuers charge.
While not all credit cards charge penalty rates, many do, including 103 of the cards surveyed for this report (about 33%). The average penalty APR in our card sample is a steep 28.74%—8.59 percentage points higher than the average purchase APR.
The Balance found that despite recent rate cuts, penalty rates may be as high as 30.90%, which is charged by five Capital One business cards: Capital One Spark Cash for Business, Capital One Spark Classic for Business, Capital One Spark Miles for Business, Capital One Spark Cash Select for Business, and Capital One Spark Miles Select for Business. The highest consumer card penalty rate is 30.74%, as charged by the BMW Credit Card.
Pay your bill on time every month and you won’t have to worry about a high-cost penalty interest rate. If you can’t afford to make a payment right now, check with your card issuer to see what financial hardship options are available to protect your credit card APR and your credit score.
What Average Credit Card APRs Mean For You
We know there are many other things grabbing your attention these days, but credit card interest rates are still crucial numbers to watch, especially if you carry a balance on your card month-to-month.
“This is really important because it directly impacts how far your payment goes towards paying off your debt,” said said Alex Wilson, CFP and a financial advisor for financial coaching company SmartPath, Inc. While the latest interest rate cuts are small, every percentage point counts, so these cuts may save you at least a little money over time.
For example, say you had a $5,000 balance on a credit card with a purchase APR of 21.99% before the Fed (and your issuer) lowered rates. If you put $150 each month toward your debt, it would take four years and four months to eliminate the balance, and you’d end up paying $2,796 in interest.
Now say that card’s purchase APR is 1.5 percentage points lower (20.49%), thanks to recent rate cuts. Assuming you still pay $150 monthly, it’ll now take four years and two months to bring the card balance down to $0, and $2,460 of your payments will go toward interest. In this scenario, that tiny 1.5 percentage-point difference between APRs saves you $336 of interest.
“It’s super important right now to pay attention to every single penny coming and going from your budget,” says financial attorney Leslie H. Tayne, founder and managing director of Tayne Law Group, a New York law firm focused on debt resolution. “Things are tight for many right now and even if they aren’t now, there is concern that they may become tight. It’s a good time to reevaluate the debts that you have, because that will translate into your expenses.”
On that note, now is a good time to see if credit card issuers can lighten your debt burden, even if just temporarily. The Balance has found many card issuers are offering a variety of relief options for those with financial difficulties, including skipped payments and waived fees with no negative impact on your interest rate or credit report.
“Right now some creditors are willing to help, but they are businesses also. At some point that willingness will end. While there is an opportunity now, call each bank and see what they can do to help,” advises Tayne. “Even if you are in a good position, call your creditor. See what they are willing to do for you. It’s your money, and right now, every penny counts.”
This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 309 U.S. credit cards during April 2020. Our data pool includes offers from 42 issuers, including the largest national banks. We track average interest rates on both a weekly and monthly basis for each card category, plus the overall average rate for all cards.
How We Calculate APR Averages
We gather purchase and transaction APR information from current credit card terms and conditions. If a credit card APR is posted as a range, we first determine the average of that range, then use that number in our overall average rate calculations, so the statistics are true averages, not skewed toward the low or high end of a spectrum.
The overall average APR in this report is an average of the average APR in each category we track: travel, cash back, secured, business, student, and store cards.
How We Calculate Average Rates vs. the Fed
We look at interest rates by card category and transaction type to give a clearer view of the interest rate you can expect to pay based on the kind of card you’re using or how you plan to use it. By comparison, the latest data from the Federal Reserve puts the average credit card APR at 15.09%.6 However, the Fed calculates its rate based on voluntary reporting from 50 credit-card-issuing banks, and it’s unclear what goes into those averages or what types of cards make up those averages.7
The Fed also reports an average rate on accounts charged interest (meaning those that carry balances month-to-month), though its calculation gives more weight to accounts with high balances. In the first quarter of 2020, the average interest rate on credit cards accruing finance charges was 16.61%, down from a record high 17.14% reported in the second quarter of 2019.6 8
How We Categorize Cards
We assign a category to each credit card in our database, and a card can go in only one category. Here’s how we define them:
Business credit cards: Cards small business owners can apply for and use to make purchases for their companies.
Cash-back credit cards: Cards that offer you a little rebate on most purchases you make with the card.
Travel rewards credit cards: Cards that allow you to earn extra points or miles on travel purchases, either with specific travel brands or on a variety of travel-related expenses. Cards that offer high-value travel redemption options are also part of this group.
Student credit cards: Cards for college or graduate students who are at least 18 years old.
Secured credit cards: Cards that require a security deposit that’s usually the same amount as the credit limit you’ll be given. These cards are aimed at helping people with poor credit or no credit history to build credit.
Store credit cards: Cards you can use at particular retail stores, and sometimes other places as well. They often offer discounts or rewards for purchases made at the associated store (or chain of stores).
Other: Cards that do not fit any of the following categories: business, cash back, student, travel, secured, and store. This includes cards that offer very few—if any—features.