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Average Credit Card Interest Rate Was 20.20% in December 2020

Stack of multicolored credit cards close-up view with selective focus.
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This post is for historical reference. Specific product rates may have changed since publication. Please see banks' sites for current rates. For current rates and analysis, see Average Credit Card Interest Rates.

The average credit card interest rate was 20.20% in December 2020, according to data collected by The Balance.

The average credit card interest rate changed very little as 2020 came to an end after a sharp decline earlier in the year following emergency federal rate cuts spurred by the pandemic. In December, credit card interest rates were steady and the average APR was lower than it was a year prior. 

Key Takeaways

  • The average APR on credit card purchases was 20.20%, down 1.02 percentage points year over year.
  • Store credit cards had the highest average interest rate.
  • Business credit cards had the lowest average interest rate overall.
  • Student credit cards had 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
  December 2020 Average APR June 2020 Average APR December 2019 Average APR
All Credit Cards 20.20% 20.21% 21.22%
Business Credit Cards 17.81% 17.93% 19.15%
Student Credit Cards 18.83% 18.78% 20.61%
Cash-Back Credit Cards 19.09% 19.07% 20.12%
Travel Rewards Credit Cards 19.18% 19.21% 20.43%
Secured Credit Cards 19.87% 20.14% 21.22%
Other 22.39% 22.13% 21.58%
Store Credit Cards 24.24% 24.28% 25.46%

What Happened in December 2020

It was a quiet month for credit cards in terms of interest rate changes. The Balance only recorded one APR update and added one relaunched card to our data pool, which was enough to nudge the overall average APR down a hair, but not notably.

U.S. Bank Card APR Adjustment

The U.S. Bank Harley-Davidson Visa Secured Card changed its APR from 22.99% to a variable range based on applicant credit: 13.99%-22.99%. This update brought the average secured card APR down 0.27 percentage points to 19.87%. The bottom end of the new APR range was lower than usual for a secured card. 

This change was made by the issuer, not driven by Federal Reserve rate changes, which was the common driving force for credit card APR adjustments early in 2020. The central bank made two emergency federal funds rate cuts back in March when the coronavirus pandemic disrupted the U.S. economy, which drove down the prime rate most credit card APRs are based on. 

PenFed Credit Union Card Relaunched

Pentagon Federal Credit Union finally relaunched its PenFed Pathfinder Rewards Visa Signature Card, which was taken down way back in 2019. The Balance had removed the card from our data pool when it didn’t relaunch as expected in early 2020, but we are tracking the offer once again. The PenFed Pathfinder card charges a 14.99%-17.99% variable purchase APR, which is low enough to impact the average travel card APR, and in turn, the overall average card APR. 

Consumers have kept card debt below record levels throughout much of pandemic. After a brief uptick in September, the U.S. revolving debt balance (which refers primarily to credit card balances) has fallen slightly to $978.8 billion, according to the Federal Reserve's latest G.19 consumer credit report. That's the lowest level recorded since May 2017 and 11.55% less (or about $120 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

One-quarter (25%) of the cards tracked for this report offered new cardholders introductory purchase APRs, which was the case throughout 2020. 

  • Typical offer length: On average, these offers lasted about 12 months. It was tough to find purchase APR deals longer than 15 months. Only five cards in our database offered such lengthy 0% offers to new cardholders in December 2020. 
  • Best 0% purchase APR deal: The longest introductory purchase rate offered was 20 months, which was 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 recommended applicants have good or excellent credit. 
  • When no-interest period ends: Cards with promotional purchase APRs charged an average ongoing rate of 18.23%.

Balance Transfer APR Deals

There were fewer promotional balance transfer rates available in December 2020 compared to a year prior, but nearly 26% of the cards tracked by The Balance offered such deals to new cardholders. 

  • Typical offer length: The average length of balance transfer rate promotions was about 14 months, which was consistent with prior month averages.
  • Longest balance transfer deal: The SunTrust Prime Rewards Credit Card gave 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 was 20 months, 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 91% of the cards in our database with such offers recommended applicants have a good or excellent credit score. 
  • When intro period ends: We found the average ongoing APR of balance transfer transactions was 18.02%.

Cash Advance Rates

About 88% of the cards we tracked in December 2020 allowed cash advances, but that convenient feature comes at a cost. 

  • Average cash advance APR: 25.35%, little changed since April 2020.
  • Highest cash advance APR: A steep 36%, as charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.

Penalty Interest Rates

If you fall seriously behind on your monthly credit card payments, exceed your credit limit, or 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%, 8.38 percentage points higher than the average purchase APR. However, the average penalty rate has been slowly inching down since June 2020.
  • 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.

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) had an average purchase APR of 23.74%. This is 4.5 percentage points above the average APR of cards marketed to those with good/excellent credit (19.24%).

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 important to watch, especially if you are focused on paying down debt this year.

The Balance confirmed many banks are still offering 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.

“Most, if not all, credit cards work on compound interest, meaning you do not pay one flat interest payment to borrow the money from the start of the loan, but the interest recalculates every month based on the balance at that time,” said Jeremy Lark, senior manager of client services for GreenPath Financial Wellness, a nonprofit credit counseling agency. 

If you haven’t been watching your balance, you may be in for a surprise when you start making payments again. 

“Even if you haven’t used your credit card since the deferral, your balance may have increased during this time simply because of the compound interest,” Lark said in an email to The Balance. “This could require a larger minimum payment than you were used to making before the deferment.”

When making card payments, prioritize the balances you already have. Interest rates are stable right now, but even single-digit APRs can balloon debt costs over time.

“As balances grow and interest charges build up, it can make the debt seem insurmountable,” said Amy Maliga, financial educator with Take Charge America, another nonprofit credit and debt counseling provider. “Try to make more than the minimum payment each month to start chipping away at the principal, and stop charging on that card until it’s paid off.”

Methodology

This monthly report was based on credit card offer data collected and monitored on a rolling basis by The Balance for 317 U.S. credit cards in December 2020. Our data pool included offers from 43 issuers, including the largest national banks. We track average interest rates on both weekly and monthly bases 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. We 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 that 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. 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.