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Average Credit Card Interest Rate Saw A Slight Drop

average credit card interest rate

According to report, average credit card interest rate fell by just 0.13%, despite Fed rate cut!

More and more Americans are carrying a balance and finding it hard to stay out of debt, especially because carrying a balance has become more costly. Over the past couple of years, credit card rates have jumped significantly, driven by the Federal Reserve’s series of 11 rate hikes that began in March 2022. Since then, the average credit card interest rate, known as annual percentage rate (APR), has risen from 16.34% to over 20%, nearing an all-time high.

Most credit cards have variable rates directly tied to the Fed’s benchmark rate. Although the Fed recently lowered interest rates by a half-point on September 18, with another possible rate cut coming soon, credit card rates are only slightly decreasing. A recent CardRatings.com survey showed that only 37% of credit cards lowered their rates after the Fed’s rate cut, resulting in an average rate decrease of just 0.13%. Even if more rate cuts follow, those with credit card balances are unlikely to see much relief, according to experts.

“When the Fed makes a rate cut, credit card rates often don’t fall by as much. One reason is that credit card companies are being cautious. After all, the Fed tends to cut rates when the economy is slowing. When that happens, lending to consumers usually gets riskier”, said Jennifer Doss, executive editor and credit card analyst at CardRatings.

How To Deal With Credit Card Rates

Regardless of rate changes, it’s wise to make credit card debt a top priority, advised Sara Rathner, a credit cards expert at NerdWallet. “It’s not always possible to pay off a large balance quickly, but any extra money you can put toward your debt each month can make a difference over time”, she added.

Renegotiating high-interest credit card debt can be beneficial and your credit score plays a key role in determining the rates. So, paying off balances in full each month and keeping credit utilization below 30% can improve your credit score and open the door to lower-interest loans, while carrying a balance month-to-month can lead to an expensive debt cycle. You can also call your card issuer and request a lower interest rate. According to a 2023 LendingTree survey, 76% of cardholders who asked for a rate reduction received one, with an average cut of about 6%.

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