Interest rate changes are rare as the pandemic continues
The average credit card interest rate is 20.23%, according to data collected by The Balance in October 2020.
The average credit card interest rate has changed very little in the past seven months. The Balance recorded just a few small APR changes in October and added five new cards to our database, which moved the average interest rate needle slightly. Overall, credit card interest rates are stable as the fourth quarter is underway, and the average APR remains well below pre-pandemic levels.
- The average APR on credit card purchases is 20.23%, down 1.01 percentage points since January.
- Store credit cards have the highest average interest rate.
- Business credit cards have the lowest average interest rate overall.
- Student credit cards have the lowest average interest rate among consumer cards.
Average Credit Card Interest Rates (APR) on Purchases by Card Category
Card type is just one factor that influences a credit card interest rate. To learn how The Balance categorizes card types, see the methodology at the bottom of this report. Other determining factors include your credit standing and the type of transaction your card is used for (more on that later in the “Average Interest Rates by Credit Card Transaction Type” section).
|Average Credit Card Interest Rates Based on Card Type|
|Current Average APR||Last Month||6 Months Ago|
|All Credit Cards||20.23%||20.19%||20.19%|
|Business Credit Cards||17.78%||17.78%||17.93%|
|Student Credit Cards||18.83%||18.83%||18.87%|
|Cash-Back Credit Cards||19.09%||19.11%||19.18%|
|Travel Rewards Credit Cards||19.20%||19.19%||20.11%|
|Secured Credit Cards||20.14%||20.14%||20.23%|
|Store Credit Cards||24.18%||24.16%||24.38%|
A credit card issuer often has a range of APRs it might charge on a certain card, such as 14.99% to 24.99%. The better your credit score, the more likely you are to get approved for an interest rate on the lower end of the range, and vice versa.
What Happened in October
October was another quiet month for credit card APRs. The Balance only recorded small interest rate adjustments for four cards:
- Diamond Resorts World Mastercard: Variable purchase APR range is now 15.74%-24.99% (was 14.99%-24.99%)
- Cabela’s Club Mastercard: Variable APR range for non-Cabela’s purchases is now 15.24%-26.99% (was 15.24%-24.24%)
- AvantCard: Variable purchase APR range is now 24.99%-25.99% (was 23.99%-25.99%)
- Macy’s Credit Card: Variable purchase APR is now 25.24%, down from 26.74%
- Macy’s American Express Card: Variable purchase APR is now 25.24%, down from 26.74%
None of these purchase APR changes were driven by rate changes made by the central bank. Interest rates moved more dramatically earlier this year following two emergency federal funds rate cuts made by the Federal Reserve when the coronavirus pandemic started to disrupt the U.S. economy.
The fed funds rate (which drives the prime rate that variable credit card APRs are based on) is resting at a 0%-0.25% range, which will likely be true until the economy and employment have rebounded from the pandemic, according to the latest Federal Reserve statements. Until then, credit card interest rate changes will be driven by issuing banks seeking to adjust card costs to help cover potential lending risks or to appeal to consumers in a different way.
New Credit Cards Added to Data Pool
The Balance also added five cards to our database in October, which was the primary reason for the slight average APR movement. We are now tracking interest rates, fees, rewards, and other details for these new products:
- Venmo Credit Card
- SoFi Credit Card
- Hotels.com Rewards Visa Credit Card
- Petal 1 Visa Credit Card
- Wyndham Rewards Earner Plus Card
Meanwhile, Consumers Are Keeping Debt In Check
Consumers have kept card debt below record levels in recent months. After several months of decline, the U.S. revolving debt balance (which refers primarily to credit card balances) has risen slightly to $988.57 billion, according to the Federal Reserve's latest G.19 consumer credit report. However, that's still 10.02% less (or about $110.6 billion) than the record high balance of $1.099 trillion in February.
Average Interest Rates by Credit Card Transaction Type
There are three main types of transactions you can use credit cards for: purchases, balance transfers, and cash advances. APRs often vary depending on which of those transactions you make, and some issuers give new cardholders a break by offering low or 0% interest rates on some of those transactions for a limited time.
Purchase APR Deals
Applying for a new credit card to get a promotional purchase APR can be a good idea if you want to finance a large purchase but avoid paying interest. For the sixth consecutive month, roughly one-quarter (25%) of the cards we track for this report are offering new cardholders introductory purchase APRs.
- On average, these offers last about 12 months, which has been the case since October 2019.
- The longest introductory purchase rate offer is 20 months, which is offered by the U.S. Bank Visa Platinum Card.
- Cards with promotional purchase APRs charge an average ongoing rate of 18.21%.
Balance Transfer APR Deals
Moving debt from a high-APR credit card to one with a lower or limited-time 0% APR on balance transfers can reduce interest costs and help you pay down debt faster. There are fewer promotional balance transfer rates available now compared to the beginning of 2020, but about 25% of the cards tracked by The Balance are currently offering such deals to new cardholders, which has been the case since May.
- The average length of these balance transfer rate promotions is about 14 months, which is consistent with prior month averages.
- The longest offer overall is touted by the SunTrust Prime Rewards Credit Card, which gives you 36 months to pay off transferred debt at a reduced interest rate of 3.25%.
- The best 0% balance transfer APR deal is 20 months long, once again offered by the U.S. Bank Visa Platinum Card.
- When promotional rate offers end, we found the average APR of balance transfer transactions is 18.03%.
Cash Advance Rates
Most cards allow you to tap your credit line by using the card to withdraw cash at an ATM. About 89% of the cards we track allow cash advances. But that convenient feature will cost you.
- The average APR on cash advances is currently 25.37%, little changed since April.
- The highest cash advance APR we found is still a steep 36%, charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.
On top of high APRs, cash advance transactions usually come with added fees and start accruing interest immediately, so avoid making them, especially if you are trying to minimize extra costs right now.
Penalty Interest Rates
If you fall seriously behind on your monthly credit card payments, exceed your credit limit, or if your bank returns a monthly payment, your standard purchase APR may be raised to the penalty interest rate. The penalty rate (also called the default rate) is the highest interest rate card issuers charge.
While not all credit cards charge penalty rates, many do, including 103 of the cards surveyed for this report (about 33%). The average penalty APR in our card sample is a steep 28.66%, which is 8.43 percentage points higher than the average purchase APR, but the lowest average penalty APR recorded by The Balance since we began tracking rates in September 2019.
The Balance observed penalty rate adjustments in August and September, as some issuers dialed back APRs that once exceeded 30%, but those rate changes have subsided.
Pay your bill on time every month and you won’t have to worry about a high-cost penalty interest rate. If you can’t afford to make a payment, check with your card issuer to see what financial hardship options are available to protect your credit card APR and your credit score.
Average APR Based on Recommended Credit Score
Based on the card offer data collected by The Balance, credit cards marketed to those with bad/fair credit scores (below 670, according to FICO) have an average purchase APR of 23.74%, 4.53 percentage points above the average APR of cards marketed to those with good/excellent credit (19.21%).
A good credit score indicates to lenders that you can manage credit cards, loans, or debt repayment. Conversely, cards that accept applicants with lower credit scores charge higher interest rates to make up for the risk of default.
The type of credit score you see advertised on a card offer page (or in one of our reviews) is a recommendation. It’s a good benchmark, but your credit score is just one of several factors credit card issuers consider when deciding whether or not to approve a card application.
What Average Credit Card APRs Mean For You
There may be many important financial matters on your radar right now, but credit card interest rates are still important numbers to watch, especially if you carry a balance month-to-month.
The Balance found many banks are still offering a variety of relief options for those with financial difficulties, including skipped payments and waived fees with no negative impact on your interest rate or credit report. However, be mindful that even if your monthly credit card payments are deferred, those accounts are probably still accruing interest.
“Credit cardholders should be aware of how their payments will be impacted once the assistance agreement ends,” said financial attorney Leslie H. Tayne, founder and managing director of Tayne Law Group, a New York law firm focused on debt resolution. “If the creditor has lowered your interest rate, keep track of when your interest rate will return to normal. If your payments have been deferred, you may not be expected to make up your missed payments at the end of the term, but you’ll need to resume making payments, and your minimum payment may be higher than it was before the assistance term.”
If you’re not deferring credit card payments, prioritize managing the accounts and balances you may already have. Interest rates are pretty stable right now, but even single-digit APRs can balloon debt costs over time.
“The greater your balance and the longer you hold onto it, the more you’ll pay in interest over time. Do your best to at least make your minimum payments on time every month,” Tayne said in an email to The Balance. “Consider cutting back in other parts of your budget, if you can, to make that happen, or keep balances as low as possible.”
This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 315 U.S. credit cards in October 2020. Our data pool includes offers from 43 issuers, including the largest national banks. We track average interest rates on both a weekly and monthly basis for each card category, plus the overall average rate for all cards.
In July 2020 we updated our data collection and analysis to better reflect how and where consumers use their credit cards. These changes are reflected in the monthly change chart above, and the average card interest rate table above. Rates published prior to August 2020 in other articles may not reflect these changes.
How We Calculate APR Averages
We gather purchase and transaction APR information from current credit card terms and conditions. If a credit card APR is posted as a range, we first determine the average of that range, then use that number in our overall average rate calculations, so the statistics are true averages, not skewed toward the low or high end of a spectrum.
The overall average APR in this report is an average of the average APR in each category we track: travel, cash back, secured, business, student, and store cards.
How We Calculate Average Rates vs. the Fed
We look at interest rates by card category and transaction type to give a clearer view of the interest rate you can expect to pay based on the kind of card you're using or how you plan to use it. By comparison, the latest data from the Federal Reserve (from the third quarter of this year) puts the average credit card APR at 14.58%. However, the Fed calculates its rate based on voluntary reporting from 50 credit-card-issuing banks, and it's unclear what goes into those averages or what types of cards make up those averages.
The Fed also reports an average rate on accounts charged interest (meaning those that carry balances month-to-month), though its calculation gives more weight to accounts with high balances. In the second quarter of 2020, the average interest rate on credit cards accruing finance charges was 16.43%, down from a record high 17.14% reported in the second quarter of 2019.
How We Categorize Cards
We assign a category to each credit card in our database, and a card can go in only one category. Here's how we define them:
- Business credit cards: Cards small business owners can apply for and use to make purchases for their companies.
- Cash-back credit cards: Cards that offer you a little rebate on most purchases you make with the card.
- Travel rewards credit cards: Cards that allow you to earn extra points or miles on travel purchases, either with specific travel brands or on a variety of travel-related expenses. Cards that offer high-value travel redemption options are also part of this group.
- Student credit cards: Cards for college or graduate students who are at least 18 years old.
- Secured credit cards: Cards that require a security deposit that’s usually the same amount as the credit limit you’ll be given. These cards are aimed at helping people with poor credit or no credit history to build credit.
- Store credit cards: Cards you can use at particular retail stores, and sometimes other places as well. They often offer discounts or rewards for purchases made at the associated store (or chain of stores).
- Other: Cards that do not fit any of the following categories: business, cash back, student, travel, secured, and store. This includes cards that offer very few—if any—features.
Board of Governors of the Federal Reserve System. "Federal Open Market Committee announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy." Accessed Nov. 2, 2020.
Board of Governors of the Federal Reserve System. "Sept. 16, 2020: Federal Reserve issues FOMC statement." Accessed Nov. 2, 2020.
Federal Reserve. "Consumer Credit Outstanding (Levels): Major Types of Credit." Accessed Nov. 6, 2020.
Federal Reserve. "Terms of Credit at Commercial Banks and Finance Companies." Accessed Nov. 6, 2020.
Federal Reserve. "Consumer Credit - G.19: About." Accessed Nov. 2, 2020.