Average Credit Card Interest Rate – September Report

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Average Credit Card Interest Rate – September Report

19.49%

The September 2020 median interest rate across all credit cards in the Investopedia card database.

Based on average advertised rates across several hundred of the market’s most popular card offerings, the median credit card interest rate for all credit cards in the Investopedia database is now 19.49%. Because the Fed samples a relatively small number of banks and only considers the low end of the interest rate range advertised by card issuers, Investopedia’s average rate data differs significantly from the overall credit card rate average tracked by the Federal Reserve (the Fed), which was most recently estimated at 14.52% for June 2020. Given that the average FICO credit score in the United States is 703, according to Experian, Investopedia believes that tracking the median midpoint value of advertised rate ranges is more accurate, as a 703 credit score would not qualify for the best rates available, as implied by Fed average rates.

Key Takeaways

  • According to Investopedia’s database of over 300 credit cards, the typical accessible interest rate is 19.49%.
  • Credit card interest rates are mostly decided by the applicant’s creditworthiness.
  • Those with great credit get the best credit card rates.

Credit card rates are projected to stay relatively constant for the foreseeable future, given the majority of card issuers use variable interest rates tied to the Federal Reserve’s Prime Rate. After cutting rates twice in the second half of 2019 and again in April 2020, the Federal Reserve is unlikely to make any adjustments to its benchmark federal funds interest rate, on which the Prime Rate is based, in the near future. However, if the epidemic continues to have a negative influence on consumer spending and the broader economy, there may be pressure to make another decrease before the end of the year. A broad range of consumer loans, including credit cards, are linked to swings in the Fed funds rate, which is the mechanism used by the Fed to promote or restrain lending based on economic circumstances.

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Credit quality is the most critical element influencing how individual credit card rates are established, with those with good credit getting the lowest rates and those with no credit or terrible credit having the highest rates. Other criteria include the kind of credit card and the credit card issuer’s risk-based pricing policy.

Investopedia monitors average advertised rates for new applicants, which are normally provided as a range for each card product, across over 300 card offerings, which are broken down below by credit quality, card type, and card issuer.

Interest Rates by Credit Quality Types

Credit quality ranges may vary based on the kind of score utilized, however the FICO score is the most often used credit score by credit card providers.

Credit quality ranges may vary based on the kind of score utilized, however the FICO score is the most often used credit score by credit card providers. The FICO score ranges for each credit quality level are used to determine credit quality:

FICO Credit Score Ranges
Excellent740-850
Good670-739
Fair580-669
Bad/No Credit350-579

It is vital for people who need to improve or repair their credit to start actively utilizing credit responsibly, which includes always paying bills on time and maintaining usage below 30% of credit limits. If you don’t currently have credit in your name, a secured credit card might be a wonderful place to start. It may take time, but appropriate credit utilization may provide good outcomes in as little as six months and continues to grow over time.

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Interest Rates by Credit Card Types

  • Credit cards that give points, miles, or cash back on purchases are known as rewards cards.
  • Student: Credit cards targeted for college students with low credit history and credit education requirements.
  • Secured credit cards demand a security deposit as an initial credit limit.
  • Company: Credit cards meant for small business owners that provide cost separation, working capital, and often incentives and discounts on business-related purchasing categories.

Interest Rates by Issuer

Credit card companies have varied risk-based pricing practices, which create variance in the interest rate ranges they promote and ultimately assign to consumers depending on accepted applicants’ credit scores.

Prime Rate Trend

Credit card interest rates are typically linked to the Prime Rate plus a margin that varies depending on the card type and the credit quality of the individual account user. The Prime Rate is now at 3.25%, the lowest level since Q4 2015, and has been reduced downward from its decade-high of 5.50% set in 2019 as a result of Federal Reserve economic stimulus activities in Q3 and Q4 2019, as well as in April 2020.

Delinquency Rate Trend

Credit card delinquency rates, defined as accounts that are 90 days or more past due, have been below 3% in recent years and have dropped by nearly 30 basis points between Q1 and Q2, most likely due to lower card spending during the pandemic and the positive impact of stimulus payments on debt repayment.

Credit Card Debt Trend

Total consumer revolving credit card debt fell below $1 trillion for the first time since 2017 in the most recent quarter, demonstrating the effect of COVID-19 on consumer credit card expenditure and outstanding credit card debt.

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Methodology

Investopedia analyzes individual credit card rates on over 300 cards made available to the public by 32 of the country’s leading banks and issuers. The majority of credit card rates are presented as a range from low to high, based on the applicant’s credit score. Investopedia estimates the average mid-point of advertised interest rate ranges as well as the average of the lower and higher ends of rates presented in ranges when calculating average rates by credit quality, card type, card type, or card issuer.

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