The average rate of interest on all credit cards in the Investopedia card database for October 2021.
The average credit card interest rate for all credit cards in the Investopedia database is currently 19.49% based on average advertised rates across several hundred of the most popular card offers on the market. Investopedia’s average rate data differs markedly from overall credit card rate averages tracked by the Federal Reserve. (Fed), which was recently quoted at 14.61% for May 2021, down from 14.75% at the end of Q1 2021, due to the fact that the Fed samples a relatively limited number of banks and Considers only the low end interest rate range advertised by card issuers. Considering that the average FICO credit score in the US was 711 in 2020, up from 703 in 2019 according to Experian, Investopedia believes it is more accurate to track the midpoint value of advertised credit card interest rate ranges rather than the low end because the 711 credit score will not qualify for the best rates implied by Fed average rates.
- The average interest rate available from Investopedia’s database of over 300 cards is 19.49%
- Credit card interest rates are largely determined by the credit quality of the applicant.
- Best credit card rates reserved for people with excellent credit
Credit card interest rates are expected to remain largely unchanged for the foreseeable future, 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 may change from month to month depending on competitive pressures and risk policies of individual banks. After cutting rates twice in 2019 for general economic reasons and again in March of 2020 in an effort to use monetary policy to kick-start economic activity amid the initial COVID-19 crisis, the Federal Reserve has to make further changes. is not estimated. The benchmark federal funds interest rate and has indicated reluctance to raise the fed funds rate for the foreseeable future, potentially until 2023. However, the ongoing economic impact from the pandemic and possible overheating of the economy due to stimulus payments could add to pressure for rate hikes. At some point later in 2021 or early 2022, the consumer price index should continue to show an uptick in inflation. A wide variety of consumer loans, including credit cards, are linked to movements of the fed funds rate, which is a mechanism employed by the Fed to stimulate or slow the amount of lending depending on economic conditions.
Several factors affect how personal credit card rates are determined, the most important of which is credit quality, with those with excellent credit receiving the lowest rates and those with no credit or poor 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 category for each card product, across more than 300 card offers, divided by credit quality, card type, and card issuer. are shown below.
Interest Rates by Credit Quality Types
The different categories of credit quality may vary depending on the type of score used but the most popular credit score used by credit card lenders is the FICO score.
The different categories of credit quality may 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 categories for each credit quality level:
|FICO Credit Score Range|
|bad / no credit||350-579|
For those who need to build or rebuild their credit, it’s important to start actively using credit responsibly – which means always paying bills on time and taking less than 30% of credit lines. To use. A secured credit card can be a good place to start if you don’t already have credit in your name. It may take time but responsible credit utilization can yield positive results after six months and builds up over time.
Interest rates by type of credit card
- Rewards: Credit cards that offer points, miles, or cash back on purchases
- Students: Credit cards designed for college students with limited credit histories and credit education needs
- Secured: Credit cards that require a security deposit that acts as an initial credit line
- Business: Credit cards designed for small business owners that offer rewards and discounts on business expenses, working capital, and often business-related purchase categories.
interest rates by issuer
Credit card issuers have different risk-based pricing policies, which cause variations in the range of interest rates they advertise and ultimately offer to customers based on the credit scores of accepted applicants.
prime rate trend
Credit card interest rates are primarily indexed to the prime rate with a margin that varies on the card product level and the credit quality of the individual account holder. The prime rate is currently at 3.25%, the lowest level since the fourth quarter of 2015 and reached 5.50% after the Federal Reserve’s economic stimulus actions in the third and fourth quarters of 2019 and again in March 2020 in the fourth quarter of 2018. has been adjusted downward from its decade high. Since then the prime rate, the last change in March 2020, has remained unchanged.
crime rate trend
The credit card delinquency rate, defined as accounts overdue for 90 days or more, has been less than 3% in recent years and declined by about 30 basis points between Q1 and Q2 and 38 basis points between Q2 and Q3 2020. Chances are. Because of the reduction in card spending during the pandemic and the positive impact of stimulus payments on paying off card debt. However, the crime rate increased slightly (10 basis points) in the fourth quarter of 2020, possibly indicating a new inflection point in the recent positive trend.
credit card debt trend
Total consumer revolving credit card debt fell below $1 trillion in the most recent quarter for the first time since 2017, reflecting the impact of COVID-19 on consumer credit card spending and outstanding credit card debt. The Fed’s latest monthly data for January 2021 shows total credit card outstanding debt fell nearly $10 billion since the end of Q4 to $965.1 billion.
Investopedia tracks personal credit card rates on more than 300 cards offered to the public from 32 of the nation’s largest banks and issuers. Most credit card rates are advertised as a range from low to high based on the applicant’s credit score. In determining average rates by credit quality, card type, card type, or card issuer, Investopedia calculates the average mid-point of advertised interest rate ranges and also calculates the average of the lower and upper ends of rates expressed across categories. Is.