Average credit card interest rates: Week of January 20, 2021

The average credit card interest rate is 16.05%.

U.S. credit card lenders once again declined to revise APRs on some of the country best-known cards, according to the CreditCards.com Weekly Credit Card Rate Report. None of the 100 cards tracked weekly by CreditCards.com advertised new rates. As a result, the average starting APR for brand-new cards remained at 16.05% for the eighth consecutive week.

APRs have remained within rounding distance of 16% for nearly 10 consecutive months

APRs on brand-new credit cards have remained unusually stable for months now. For example, the average new card APR hasn’t wavered by more than a quarter of a percentage point since April and it has remained just above 16% since mid-November. Earlier in the year, the average card APR briefly dipped to 15.97%, which is the lowest APR average CreditCards.com has recorded since 2017. But for most of 2020, the average card APR remained above 16%.

Despite their current stability, average APRs are dramatically lower than they were a year ago when the average APR began 2020 at 17.30%.

At that time, even cardholders with excellent credit were likely to be assigned rates as high as 17% or more. Today, by contrast, few general market cards that are marketed to borrowers with the best credit charge such high rates.

Among the 100 cards tracked by CreditCards.com, for example, only one general market card for borrowers with excellent credit currently charges a minimum APR above 16.99%. The Capital One Venture Rewards Card starts APRs at 17.24% and caps them at 24.49%. But most comparable cards charge lower rates.

Among travel rewards cards, for example:

  • The Bank of America® Premium Rewards® card and the Chase Sapphire Preferred Card both start APRs at 15.99%
  • The APRs on the high-end Chase Sapphire Reserve card and Citi Prestige® Card start at 16.99%.
  • The minimum APR on the Discover it® Miles card is 11.99% while the APRs on a number of popular airline cards, such as the Southwest Airlines Rapid Rewards Premier Credit Card, the Delta SkyMiles® Gold American Express Card and the Frontier Airlines World Mastercard from Barclays, start below 16%.

The average maximum card APR is also significantly lower. For example, the average maximum APR for all 100 cards included in the CreditCards.com rate report is currently 23.55%. The average median APR is 19.8%.

Capital One’s decision to leave rates alone last spring leaves it out of step with other issuers

When the Federal Reserve cut federal interest rates by more than a full percentage point last spring, Capital One was the only major, nationwide issuer not to match the central bank’s rate cut on new general market cards. As a result, cardholders with lower scores are less likely than other cardholders these days to secure a significantly lower APR than what they would have been able to get a year ago.

That’s because Capital One is one of the leading issuers of cards for borrowers with fair credit. Its line of subprime cards continues to charge the same 26.99% APR the cards advertised for much of last winter.

However, borrowers with lower scores do have more options than they had a year ago if they compare rates with other issuers. For example:

  • The Discover it® Secured card and the BankAmericard Secured Credit Card currently offer a 22.99% APR.
  • The Citi® Secured Mastercard® card starts APRs at 22.49%.

Not all lenders have given borrowers with bad credit a reprieve, though, amid the pandemic. For example, U.S. Bank dramatically hiked the APR on its flagship secured card, pushing the card’s only APR to 25.99%. As a result, the average APR for all subprime cards tracked by CreditCards.com is the same as it was a year ago: 25.3%.

The average APR for rewards cards, by contrast, has fallen from 17.11% to 15.76%, while the average low interest card APR has tumbled from 14.1% to 12.77%.

See related: How do credit card APRs work?

*All information about the Chase Sapphire Preferred Card and the Citi Prestige has been collected independently by CreditCards.com and has not been reviewed by the issuer. This offer is no longer available on our site.

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.05% 16.05% 16.03%
Low interest 12.77% 12.77% 12.83%
Cash back 15.85% 15.85% 16.09%
Balance transfer 13.85% 13.85% 13.93%
Business 13.91% 13.91% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.53% 15.53% 15.48%
Rewards 15.76% 15.76% 15.82%
Instant approval 18.38% 18.38% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 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: January 20, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

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 length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. 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.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account 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% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using 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 lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being 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.

Source: creditcards.com

1 in 10 Americans behind on monthly bills due to COVID

Almost a third of Americans report that since the onset of the pandemic, they have experienced a loss of income, and it has left many of them behind on their monthly bills.

1 in 10 Americans behind on monthly bills due to COVID

Electronic payments provider ACI Worldwide recently surveyed U.S. adults and found 1 in 10 reporting they are currently past due on monthly bills as a direct result of COVID 19-related financial hits.

The situation is worse for younger Americans than older ones, with more than a quarter of those age 18-34 (26%) saying they are behind on their bills. For those age 35-51, the share was 14%, while only 5% of those age 52 and older reported having past due bills due to the pandemic.

See related: Taking financial control amid a global pandemic

When asked how long they expect it will take to catch up, more than a third (35%) indicated it would take them six months or longer, with the remaining 65% saying they believe they can get back on track in under six months.

As a result of their missed payments, 15% of respondents reported they had contacted billers for payment arrangements or deferrals.

ACI Worldwide’s survey was conducted among a U.S. Census-balanced panel of 3,000 adults age 18 and older who are responsible for submitting payments for at least two of their household’s monthly bills. The results were released Dec. 15.

Source: creditcards.com

Fed reports credit card balances continued to dip in November

Credit card balances slightly dipped in November, as the COVID pandemic fallouts continued, and with the government continuing to wrangle about a second round of fiscal stimulus measures.

Consumer revolving debt – which is mostly based on credit card balances – was down $700 million on a seasonally adjusted basis in November to $978.8 billion, according to the Fed’s G. 19 consumer credit report released Jan. 8.

In November, credit card balances were off 1% on an annualized basis, after October’s 6.7% drop, which came on the heels of September’s 3.2% annualized gain.

Total consumer debt outstanding – which includes student loans and auto loans, as well as revolving debt – continued to grow and rose $15.3 billion to $4.176 trillion in November, a 4.4% annualized gain.

Card balances had touched an all-time high in February 2020 before the coronavirus pandemic started impacting consumer spending and bank lending. They dipped below the $1 trillion mark in May, for the first time since September 2017.

The Fed also reports that interest rates on credit cards were at 14.65% in November, with the rates on cards that are assessed interest (since they carry a balance) at 16.28%.

See related: Paying with credit is getting more expensive in the pandemic

Consumers expect household spending to rise

Consumers expect their household spending at the median to grow 3.7% in the year ahead, the highest in more than four years – even though they don’t anticipate much growth in their income (2.1%) or earnings (2%) – according to the New York Fed’s survey of consumer expectations for November.

Moreover, they are less optimistic about their household financial situation in the year ahead, with more of them expecting it to decline, and fewer consumers expecting an improvement.

Even then, more respondents are optimistic about their ability to access credit in the coming year, expecting it will be easier. However, the mean probability of missing a minimum debt payment in the next three months rose by 1.6 percentage points to 10.9%. Even then, this is still below its 11.5% average for 2019.

Less cheer on labor market front

On the labor market front, more consumers expect that the U.S. unemployment rate will be higher in the year ahead, with the average probability of this outcome rising to 40.1% in November, from October’s 35.4%.

However, they were less pessimistic about the prospects of losing their jobs, with this probability down to 14.6% on average, from October’s 15.5% (but still above the 2019 average of 14.3%).  Those above the age of 60 and those without a college degree were more optimistic about holding on to their jobs.

The respondents were less likely to voluntarily leave their jobs, with the mean probability of this down 1.3 percentage points to 16.6% (a low for the survey). Those 60 and older were at the forefront of this decline. However, respondents on average were more optimistic about the prospects for landing a new job if they lost their current ones.

In the meantime, the government reported that the economy shed 140,000 jobs in December, and the unemployment rate remained at 6.7%. The jobs lost were mostly in the sectors hard hit from the pandemic, with closures impacting the leisure and hospitality sector, as well as private education jobs.

The retail sector added jobs to aid holiday shopping, mostly in warehouses (which benefit from e-commerce) and superstores.

Although average hourly earnings for private sector employees rose $0.23, this is mostly because of the loss of lower-paying jobs in the leisure and hospitality sector, which tilted the average wage for the employed workers to the upside.

In online commentary, Diane Swonk, chief economist at GrantThornton, noted, “The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”

Given that it will take a while to more fully open the economy, she is in favor of “aid today and another tranche once the new administration takes office.”

See related: Second stimulus deal provides $600 per individual

Application rates for credit cards plunged on pandemic impact

The New York Fed also reported in its credit access survey, which is conducted every four months as part of its survey of consumer expectations, that most credit applications and acceptance rates fell sharply after last February. Mortgage credit was the exception to this.

For credit cards, the application rate was off a steep 10.6 percentage points since February to touch a survey low of 15.7%. This decline impacted all age groups and credit score categories. Applications for credit card limit increases dropped 6.6 percentage points to 7.1% between February and October, another series low since the survey began in October 2013. The decline was spread across all ages and credit score categories.

Consumers applying for credit cards were also subject to steep rejection rates, with this rate rising 11.6 percentage points from February to touch 21.3% in October. Those looking for higher credit limits also were rejected about 37% of the time, from about 25% of the time in February.

No wonder consumers said they were less likely to apply for a credit card or credit limit increase in the next 12 months, with these figures falling 36% and 34% on average since February 2020. Those with credit scores above 680 led this decline.

Source: creditcards.com