Average Credit Card Interest Rates - Nov. 2023: Rates Remain Steady

The median credit card interest rate for all credit cards in the Investopedia database remained flat at 24.12% in Nov. 2023, for a second straight month. Credit card interest rates are based on average advertised rates across several hundred of the most popular card offers in the market. Investopedia’s average rate data differs markedly from the overall credit card rate average tracked by the Federal Reserve (the Fed), which was most recently quoted to be 20.68% for Q2 2023, due to the fact that the Fed samples a relatively limited number of banks and only considers the low end of the interest rate range advertised by card issuers. Given that the average FICO credit score in the U.S. was 714 at the end of 2022, unchanged from 2021, according to Experian, Investopedia believes it's more accurate to track the median midpoint value of advertised credit card interest rate ranges rather than the low end, as a 714 credit score would not qualify for the best rates available as implied by Fed average rates.

Credit card interest rates are expected to continue to adjust upward in response to Fed rate increases that began in 2022 and have continued in 2023, as most card issuers employ variable interest rates that are indexed to the Federal Reserve’s prime rate. However, the lower and upper ends of available card rates can change from month to month depending on competitive pressures and individual banks' risk policies. The Federal Reserve pivoted to an aggressive policy of rate increases to its benchmark federal funds interest rate to combat rising inflation that began at the end of 2021. Specifically, due to dramatic increases in the consumer price index in Q4 of 2021 and in all four quarters of 2022, the Fed has indicated that interest rate hikes will continue to occur, though at a slower pace in 2023 as inflation moderates.

The latest increase announced in July was for 0.25%, matching the previous increases of 25 basis points in May, March, and February. This compares to a string of 0.75% increases in the second half of 2022. Although the Fed kept rates steady at its most recent meeting on Nov. 1, it remains open to keeping rates steady or raising them again at it's next meeting on in November, depending on economic conditions. Approximately 80% of interest rate traders are betting that the Fed will hold rates steady at it's next meeting, though. A wide variety of consumer loans, including credit cards, are tied to movements of the fed funds rate, which is the mechanism the Fed employs to stimulate or slow the magnitude of lending depending on economic conditions.

Several factors influence how individual credit card rates are set, the most important of which is credit quality, with those with excellent credit receiving the lowest rates and those with no credit or bad credit receiving the highest rates. Other factors include the type of credit card and the risk-based pricing policies of the specific credit card issuer.

Investopedia tracks average advertised rates for new applicants, which are typically quoted as a range for each card product, across more than 300 card offers, which are shown below broken out by credit quality, card type, and card issuer.

Interest Rates by Credit Quality Types

Different ranges of credit quality can vary depending on the type of score used, but the most popular credit score used by credit card lenders is the FICO score.

Credit quality is defined according to the FICO score ranges for each credit quality level:

Interest Rates by Credit Card Types

• Balance transfer: Credit cards that offer a promotional rate, often 0%, for a year or more.
• Business: Credit cards designed for small business owners providing segregation of business expenses, working capital, and often rewards and discounts on business-related purchase categories.
• Low cost: Credit cards designed for those with bad credit or no credit history that often have no annual fee but charge higher interest rates to offset higher credit risk.
• Rewards: Credit cards that offer points, miles, or cash back on purchases.
  
• Secured: Credit cards that require a security deposit that serves as an initial credit line.
• Student: Credit cards designed for the limited credit history and credit education needs of college students.
  

Interest Rates by Issuer

Credit card issuers have different risk-based pricing policies that cause variation in the ranges of interest rates they advertise and eventually assign to customers based on approved applicants' credit scores.

Prime Rate Trend

Credit card interest rates are predominantly indexed to the prime rate along with a margin which varies at the card product level and individual account holder's credit quality. The prime rate currently stands at 8.50%, having risen 500 basis points since the beginning of 2022 following several rate increases by the Federal Reserve, most recently with another increase of 0.25% in July.

Delinquency Rate Trend

Credit card delinquency rates, defined as accounts that are 90 days or more overdue, have been below 3% in recent years with a high point of 2.76% in January of 2020. However, during the pandemic the delinquency rate fell to a low of 1.48%, bottoming out in April of 2021. With the highest inflation in 40-years, caused by supply chain issues and increased consumer demand, driving higher spending on credit cards, the delinquency rate has risen significantly to 2.77% at the end of Q2 2023. This is up 34 basis points from Q1 2023 and up over half a percent since the beginning of the year.

Credit Card Debt Trend

Total consumer revolving credit card debt passed the $1 trillion mark just prior to the pandemic and then fell sharply to a low of $970 billion in Jan. 2021. Since then revolving debt has climbed back beyond pre-pandemic levels to over $1.27 trillion for the most recent month reported by the Federal Reserve, July 2023, reflecting continued strong consumer demand and credit card spending. Pent up consumer demand coupled with supply chain issues and resulting shortages of goods and services has also fueled record inflation levels not seen since the early 1980's. Fed increases to its discount rate charged to banks for overnight lending has a direct impact on credit card interest rates that adjust automatically, as they are pegged to the prime rate.

Methodology

Investopedia tracks individual credit card rates on more than 300 network-branded cards offered to the public from 43 of the nation’s largest banks and issuers. Most credit card rates are advertised in the form of a range from low to high depending on the applicant’s credit score. In determining average rates by credit quality, card type, card type, or card issuer, Investopedia calculates the average midpoint of advertised interest rate ranges and also calculates the average of the lower and upper ends of rates that are expressed in ranges.