Purchase, balance transfer APRs for new accounts were unchanged in February 2021
The average credit card interest rate is holding steady at 20.28%, according to data collected by The Balance.
The brief burst of credit card interest rate changes reported in January didn’t herald a longer trend. The Balance didn’t record any purchase or balance transfer interest-rate changes in February. Credit-card-issuing banks are holding advertised APRs steady for new cardholders as the nation approaches the one-year mark of pandemic-driven offer changes.
The average credit card APR is still lower than it was prior to the pandemic.
- The average APR on credit card purchases is 20.28%, unchanged since January and down 1.02 percentage points year-over-year.
- 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’s 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||1 Month Ago||6 Months Ago||1 Year Ago|
|All Credit Cards||20.28%||20.28%||20.21%||21.30%|
|Business Credit Cards||17.92%||17.92%||17.95%||19.12%|
|Student Credit Cards||18.83%||18.83%||18.73%||20.23%|
|Cash-Back Credit Cards||19.09%||19.09%||19.07%||20.23%|
|Travel Rewards Credit Cards||19.26%||19.26%||19.19%||20.47%|
|Secured Credit Cards||20.29%||20.29%||20.14%||21.13%|
|Store Credit Cards||24.24%||24.24%||24.22%||25.33%|
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.
What Happened in February
In short, not much. After a brief flurry of advertised credit card APR tweaks in January, banks held interest rates steady in February. The Balance didn’t record any purchase or balance transfer APR changes, just a tiny cash advance APR increase for the Kroger Rewards World Mastercard (now 25.99%, up from 25.24%).
It’s been nearly one year since the Federal Reserve made its first emergency rate change in response to economic uncertainty at the start of the coronavirus pandemic, which resulted in several months of interest rate cuts by banks. Since then, credit card APR changes have been uncommon as the Fed has maintained its benchmark rate (the federal funds rate) near zero. The federal funds rate is tied to the prime rate, which in turn influences credit card APRs. The Fed is likely to hold rates steady until inflation and employment rates stabilize, according to the latest policy statements.
Cardholders Are Keeping Card Debt Under Control
Consumers really took advantage of the lower interest rate environment and reigned in card debt last year. The national revolving debt balance, which is largely composed of credit card debt, dropped 11.2% in 2020, ending the year at $975.92 billion, according to the Fed’s latest G.19 consumer credit report. It’s now at the lowest level since April 2017 and about $122.8 billion less than the brief all-time high of $1.099 trillion reached in February 2020.
While card debt fell last year, so did card spending. The latest Quarterly Report on Household Debt and Credit from the New York Federal Reserve found that credit card use was lower than normal throughout much of 2020. In fact, the agency recorded the largest annual decline in card balances since it started tracking the figure in 1999.
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. Nearly one-quarter of the cards we track for this report offer new cardholders introductory purchase APRs, which is typical based on the past year of offer data.
- Typical offer length: On average, these offers last about 12 months, which has also been the norm. It’s rare to find purchase APR deals longer than 15 months. Only five cards in our database offer 0% new-cardholder deals longer than 15 months.
- Best 0% purchase APR deal: The longest introductory purchase rate offer is 20 months, which is offered by the U.S. Bank Visa Platinum Card.
- Credit score qualifications: If you want a 0% purchase APR, you’ll likely need stellar credit. A whopping 94% of such card offers in our database recommend applicants have good or excellent credit.
- Rate after no-interest period ends: Cards with promotional purchase APRs charge an average ongoing rate of 18.33%, unchanged since a slight uptick recorded in January.
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 this time last year, but about 26% of the cards tracked by The Balance currently offer such deals to new cardholders.
- Typical offer length: The average length of balance transfer rate promotions is about 14 months, which is consistent with prior month averages.
- Longest balance transfer deal: The SunTrust Prime Rewards Credit Card gives new cardholders 36 months to pay off transferred debt at a reduced interest rate of 3.25%.
- Best 0% balance transfer offer: The longest 0% balance transfer APR deal is 20 months long, once again offered by the U.S. Bank Visa Platinum Card.
- Credit score qualifications: Much like 0% purchase APR offers, you’ll probably need good credit to qualify for a balance transfer deal. A steep 90% of the cards in our database with such offers recommend applicants have a good or excellent credit score.
- Rate after intro period ends: We found the average ongoing APR of balance transfer transactions is 17.96%.
It’s common for cards to offer 0% or low interest-rate deals on both purchases and balance transfers. More than half the cards we track that advertise promotional interest rate offers offer new cardholders dual APR breaks for a limited time.
Cash Advance Rates
Most cards allow you to tap your available credit by using the card to withdraw cash at an ATM. Nearly 89% of the cards we track allow cash advances, but that convenient feature comes at a cost.
- Average cash advance APR: 25.40%, up slightly since December 2020 but still below the pre-pandemic average.
- Highest cash advance APR: A steep 36%, as 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 taking advances, 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 107 of the cards surveyed for this report (about 34%).
- Average penalty APR: Based on our card sample, the average default rate is 28.58%. That’s 8.3 percentage points higher than the average purchase APR, but lower than it was at this time last year.
- Highest penalty APR: 29.99% is a popular penalty, as 51 cards in our database charge it. The highest penalty rate once exceeded 30%, but some issuers dialed back those steep rates between August and October 2020.
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 consumers with bad/fair credit scores (below 670, according to FICO) have an average purchase APR of 23.87%, 4.61 percentage points above the average APR of cards marketed to those with good/excellent credit (19.26%).
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
It’s important to be mindful of credit card interest rates, but especially during periods of economic and financial uncertainty.“Even if you aren’t carrying a balance now, there’s a chance you will in the future,” said Bruce McClary, vice president of communications for the National Foundation of Credit Counseling. “You don’t know when you might have to fall back on your credit card for help covering expenses.”
If you’re in the process of paying off credit card debt, remember that credit card interest compounds, meaning previous interest charges are included in each monthly interest calculation. As a result, card balances can grow quickly, and every APR percentage point matters. Even small changes to your card’s interest rate, similar to what we’ve seen happen to the average credit card APR this past year, add up to higher debt costs:
This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 317 U.S. credit cards in February 2021. 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 November of 2020) puts the average credit card APR at 14.65%. 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 November of 2020, the average interest rate on credit cards accruing finance charges was 16.28%, 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.
Average Credit Card Interest Rate Was 20.28% in January 2021
Average Credit Card Interest Rate Was 20.19% in September 2020
Average Credit Card Interest Rate Was 20.20% in December 2020
Average Credit Card Interest Rate Was 20.21% in August 2020
Average Credit Card APR Was 20.24% in November 2020
Average Credit Card Interest Rate Was 20.21% in July 2020
Average Credit Card APR Was 20.23% in October 2020
Average Credit Card Interest Rates in June 2020
Average Credit Card APR Is Below Pre-Pandemic Levels
Average Credit Card Interest Rates, April 2020
Average Credit Card Interest Rate Was 20.14% in May 2020
Average Credit Card Interest Rates, September 2019
Average Credit Card Interest Rates, February 2020
Average Credit Card Interest Rates December 2019
Average Credit Card Interest Rates, January 2020
Average Credit Card Interest Rates October 2019