Average Credit Card Interest Rate Is 20.25%

Purchase APRs quietly sink, but penalty rate rises continue

close-up of red, yellow, and blue credit cards in wallet
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The average credit card interest rate is now 20.25%, according to data collected by The Balance.

A handful of online offer changes and the addition of three new cards to our database moved the average credit card interest rate down a small fraction of a percentage point, just like last month’s report. The mean annual percentage rate (APR) is now at the lowest point recorded in 2021.

Meanwhile, the average penalty interest rate rose to a new series high in July, as some banks added default rates to new and existing card offers.

Key Takeaways

  • The average APR on credit card purchases is currently 20.25%, up slightly from one year ago but still below its pre-pandemic peak.
  • 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 (APRs) 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
Average APR 1 Month Ago 6 Months Ago 1 Year Ago
All Credit Cards 20.25% 20.26% 20.28% 20.21%
Business Credit Cards 17.57% 17.57% 17.92% 17.93%
Student Credit Cards 18.73% 18.73% 18.83% 18.78%
Cash-Back Credit Cards 19.24% 19.23% 19.09% 19.12%
Travel Rewards Credit Cards 19.32% 19.32% 19.26% 19.21%
Secured Credit Cards 20.55% 20.55% 20.29% 20.14%
Other 22.02% 22.14% 22.31% 22.15%
Store Credit Cards 24.30% 24.30% 24.24% 24.17%

A credit card often has a range of APRs, 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 July: More New Cards, Higher Penalty Rates

We saw just a bit of interest rate activity in July, which was enough to nudge the average-rate needle down. For example, Citi lowered the purchase APRs advertised online for its Citi Diamond Preferred Card by a full percentage point (from 14.74%-24.74% to 13.74%-23.74%, variable), which helped bring our “Other” category average rate down, since we categorize it as a balance transfer card.

We also added the details for three new cards to our database to keep track of their pricing terms:

  • Chase Slate Edge: 0% APR on purchases and balance transfers for 12 months, then 14.99%-23.74%, variable.
  • Wells Fargo Active Cash Card: 0% APR on purchases and balance transfers for 15 months, then 14.99%-24.99%, variable.
  • Capital One Spark Cash Select for Good Credit: 0% APR on purchases for 12 months, then 15.99%-23.99%, variable.

The Chase Slate Edge card is all about its low promotional rate offers, which have been creeping back into the marketplace this year after issuers pulled back many promotional deals in 2020. The other two cards we added have rates just above average for their categories (cash-back rewards and business, respectively), but not high enough to significantly move the average-interest-rate needle.

Average Penalty Rate Climbs Higher

Once again, the most notable interest rate updates recorded in July were among penalty rates, the highest interest rate card issuers charge cardholders who fall behind on monthly payments.

The average penalty rate is now 28.86%, up from 28.81% in June, and 28.67% in May. There are also more cards advertising penalty rates now than there were when The Balance started tracking credit card interest rates in late 2019.

Two of the three new cards added to The Balance’s data pool (Chase Slate Edge and the Capital One Spark Cash Select for Good Credit) include penalty rates in their new-applicant card terms. Chase added 29.99% penalty rates to four of its cards in July after adding penalty rates to more than a dozen of its cards in June.

Penalty interest rates aren’t a cost all cardholders will pay; banks may be using the steep APRs to keep people on track as spending picks up this year. So far, serious delinquency rates are still trending downward, according to the Federal Reserve Bank of St. Louis.

“As consumer spending rebounds, card issuers want to ensure the continued disruption in the job market doesn’t impact payments on these new purchases, so in some cases, issuers may be adjusting penalty interest rates to incentivize timely payment,” said John Cabell, director of Banking and Payments Intelligence at J.D. Power, in an email to The Balance.

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. 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 and avoid paying interest. About 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 12 months, which has also been the norm. It’s rare to find purchase APR deals longer than 15 months. Only six cards in our database offer 0% new-cardholder deals longer than 15 months.
  • Best 0% purchase APR deal: The U.S. Bank Visa Platinum Card offers 20 months of 0% on purchases.
  • Credit score qualifications: If you want a 0% purchase APR, you’ll likely need stellar credit. Approximately 95% 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 18.45%, the second-highest average recorded since March 2020.

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 before the pandemic, when issuers dialed back such offers. About 26% of the cards tracked by The Balance currently offer balance transfer 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, 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. Approximately 92% 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 18.24%, up slightly from June and the highest ongoing average recorded during the past year.

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 deals 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. Approximately 88% of the cards we track allow cash advances, but that convenient feature comes at a cost.

  • Average cash advance APR: 25.53%, up slightly compared to prior months, 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 costs.

Penalty Interest Rates

If you fall behind on your monthly credit card payments, if you exceed your credit limit, or if your bank returns a monthly payment, your standard purchase APR may be raised to the penalty interest rate (also called the default rate). While not all credit cards charge penalty rates, many do, including 126 of the cards surveyed for this report (about 38%). Penalty rates have become more common over the past year, too.

  • Average penalty APR: Based on our card sample, the average default rate is 28.86%. That’s 8.61 percentage points higher than the average purchase APR, and only slightly lower than it was prior to the pandemic.
  • Highest penalty APR: 29.99% is a popular penalty rate, as 82 cards in our database charge it. The highest penalty rate once exceeded 30%, but some issuers dialed back those steep rates starting in August 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 and fair credit scores (below 670, according to FICO) have an average purchase APR of 23.85%. This is 4.49 percentage points above the 19.36% average APR of cards marketed to those with good or excellent credit.

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, especially if you’re using credit cards more often these days.

“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 over the past year, could add up to higher debt costs. If you fall behind on your monthly payments, those costs can rise even more under a much higher penalty APR.

Methodology

This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 329 U.S. credit cards in July 2021. Our data pool includes offers from 44 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 line graph in the introduction of this article, and the average card interest rate data table shortly below that. Rates published prior to August 2020 in other rate reports 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. We do this 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 May 2021 data from the Federal Reserve puts the average credit card APR at 14.61%. 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), although its calculation gives more weight to accounts with high balances. In May 2021, the average interest rate on credit cards accruing finance charges was 16.30%, down from a record high of 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 cash back 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 requiring a security deposit that’s usually the same amount as the credit limit. These cards are aimed at helping people with poor credit or no credit history 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.