Purchase APR and 0% balance transfer offer changes are uncommon right now
The average credit card interest rate is 20.21%, according to data collected by The Balance in August 2020.
That’s unchanged from July’s average credit card interest rate and not much different from June's 20.22% average, either.
Overall, credit card interest rates are stable right now, unlike earlier this year when the Federal Reserve made emergency rate cuts as the pandemic began disrupting the U.S. economy. The Balance recorded a few small card APR changes in August, but those were not significant enough to move the average rate.
- The average APR on credit card purchases is 20.21%, down 1.03 percentage points since January but unchanged from July.
- Store credit cards have the highest average interest rate.
- Business credit cards have the lowest average interest rate.
- 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||20.21%||20.21%||21.30%|
|Business Credit Cards||17.95%||17.93%||19.12%|
|Student Credit Cards||18.73%||18.78%||20.23%|
|Cash-Back Credit Cards||19.07%||19.12%||20.23%|
|Travel Rewards Credit Cards||19.19%||19.21%||20.47%|
|Secured Credit Cards||20.14%||20.14%||21.13%|
|Store Credit Cards||24.22%||24.17%||25.33%|
A credit card issuer often has a range of APRs it might charge on a certain card, such as 16.99% to 26.99%. 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 August
August was a relatively quiet month for credit card APR changes. In June and July, The Balance watched issuers reduce or eliminate promotional balance transfer rate offers, and in some cases, close balance transfer card applications entirely as they hesitated to take on additional financial risk during the ongoing pandemic.
Balance Transfer Deals Stabilize
That promotional-offer trend subsided in August. In fact, the Balance has not observed any cards shortening balance transfer intro periods since July 23, 2020. U.S. Bank removed a couple of business cards from its product line-up last month, but other than that, The Balance only recorded a handful of purchase APR adjustments.
Small Purchase APR Changes
Only four credit cards tracked by The Balance changed purchase APRs in August, but in most cases, interest rates were lowered or only nominally adjusted:
- Wells Fargo Rewards Card: Low end of variable APR range was lowered to 12.49% from 16.49%
- Target RedCard Credit Card: Variable purchase APR was lowered to 22.90% from 24.40%
- AvantCard: Variable purchase APR updated from 24.49%-25.49% to 23.99%-25.99%
The most notable interest rate change record in August was on the Petal Visa Credit Card, which jacked up the high end of its variable range from 23.99% to 29.49%. The variable purchase APR range is now 12.99% to 29.49% for new cardholders.
The Balance reached out to Petal to learn more about this offer change. A spokesperson told us via email that the adjustment, “allows us to serve a wider range of customers and credit types, and continue making credit available even in uncertain economic times.”
The Fed Holds Steady
None of the interest rate changes observed in August were driven by rate changes made at a federal level. That was common earlier this year when card issuers spent several months reducing APRs in response to emergency federal funds rate changes spurred by the pandemic. It’s been more than four months since The Balance has recorded an APR decrease based on Fed actions, and the fed funds rate is now resting at a 0%-0.25% range.
That’s not changing anytime soon, either, based on recent statements from the Federal Reserve. The benchmark interest rate will remain unchanged until the economy and employment have rebounded from the pandemic, and inflation can maintain a 2% average. Until that happens, credit card interest rate changes will be driven solely by issuing banks.
Meanwhile, Consumers Are Managing Card Debt
Consumers are still collectively carrying a huge amount of card debt, but the figure is way down from where it was just a few months ago.
The U.S. revolving debt balance (which refers primarily to credit card balances) has dipped to $994.68 billion, according to the latest G.19 consumer credit report. That's a 9.49% drop of more than $104 billion from the record high balance of $1.099 trillion in February. It's now the lowest it's been since August 2017.
The latest consumer credit report marks the fifth consecutive month of lower revolving debt balances. The sharp declines are likely due to a steep drop in consumer spending as the coronavirus pandemic quickly changed how people were working and using money. Spending has picked up a bit in recent months as stay-at-home restrictions lifted around the U.S., but that activity has not led to higher debt balances, despite the financial stressors many are facing this year.
In fact, low interest rates and high personal savings rates have put many consumers in a good place to be able to manage their debt right now, despite the challenges of this year, according to PNC Bank economist Abbey Omodunbi.
“Credit burdens do not appear to be a problem right now,” he told The Balance during a phone interview. “Plus, institutions are being more cautious with lending, so we don’t expect there to be huge issues with how much credit consumers are taking on and their ability to manage it throughout the rest of this year.
Average Interest Rates by Credit Card Transaction Type
There are three main transaction types credit cards commonly offer: 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
If you want to finance a large purchase with a new credit card, finding a card that offers a promotional purchase APR (such as 0% for 15 months) can help with that. For the fourth 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 two cards in our database: U.S. Bank Visa Platinum Card and U.S. Bank Business Platinum Card.
- Cards with promotional purchase APRs charge an average ongoing rate of 18.22%.
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 promotional balance transfer rates to new cardholders, just like last month.
- 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, offered by the U.S. Bank Business Platinum Card. The longest 0% offer on a consumer card is 18 months, as advertised by the HSBC Gold Mastercard, Citi Simplicity, Citi Diamond Preferred, Citi Double Cash Card, and the Wells Fargo Platinum Card.
- When promotional rate offers end, we found the average APR of balance transfer transactions is 18.02%.
Cash Advance Rates
Most cards allow you to tap your credit line by using the card to withdraw cash at an ATM, but that convenient feature will cost you. About 89% of the cards we track allow cash advances.
- The average APR on cash advances is currently 25.36%, nearly unchanged since April.
- The highest cash advance APR we found is still 36%. That steep cash advance APR is charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.
On top of steep APRs, cash advance transactions usually come with extra fees and start accruing interest immediately, so avoid making them as much as possible, especially if you are trying to minimize extra costs during this uncertain time.
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 28.73%, which is 8.52 percentage points higher than the average purchase APR, but the lowest average recorded by The Balance since we began tracking rates in September 2019.
In August, Capital One lowered the penalty APR of several cards that once held the spot for highest penalty APR. Today the highest penalty rate is 30.49% (down from 30.90% last month) and charged by five PNC Bank business cards: PNC Cash Rewards Visa Signature Business Credit Card, PNC points Visa Business Credit Card, PNC Travel Rewards Visa Business Credit Card, PNC Visa Business Credit Card, and the PNC Business Options Visa Signature Credit Card. The highest consumer card penalty rate is 29.99% and charged by 51 cards in The Balance’s database.
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 right now, 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
If you have less than perfect credit, chances are your card probably has above-average interest rate. 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 25.20%, 5.93 percentage points above the average APR of cards marketed to those with good/excellent credit (19.25%).
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 marketed on a card offer page (or in one of our reviews) is a recommendation. It’s a good benchmark, but your credit score is only one of many things credit card issuers consider when deciding whether or not to approve a card application.
What Average Credit Card APRs Mean For You
We know there are many other things grabbing your attention these days, but credit card interest rates are still important numbers to watch, especially if you carry a balance on your card month-to-month. If you aren’t making credit card payments right now, be even more mindful of interest rates.
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.
“Since credit cards use compound interest, your balance will most likely be increasing throughout the time you have a payment deferment on the card. This could result in higher monthly minimum payments once the deferment period is over,” Jeremy Lark, senior manager of client services for GreenPath Financial Wellness, told The Balance via email. “If making the minimum payments before was difficult, deferment could actually result in a bigger problem once payments restart.”
If you’re not deferring credit card payments, focus on managing the accounts and balances you may already have. Interest rates may be pretty stable right now, but even single-digit APRs increase debt costs over time.
“Managing one’s spending plan and covering essentials during this time is key, but so is finding a way to pay down the debt,” Lark said. “Look for opportunities to pull back or save in places in your regular spending and dedicate these funds either to cover essentials or accelerate payments. This will help to keep the debt from ballooning.”
This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 310 U.S. credit cards in August 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 below. Rates published prior to August 2020 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 puts the average credit card APR at 14.52%. 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 15.78%, 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. "Open Market Operations." Accessed Sept. 2, 2020.
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 Sept. 2, 2020.
Board of Governors of the Federal Reserve System. "July 29, 2020: Federal Reserve issues FOMC statement." Accessed Sept. 2, 2020.
Federal Reserve. "Consumer Credit Outstanding (Levels): Major Types of Credit." Accessed Sept. 8, 2020.
Federal Reserve. "Consumer Credit - G.19." Accessed Sept. 8, 2020.
Federal Reserve. "Consumer Credit - G.19: About." Accessed Sept. 2, 2020.