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Average Credit Card Interest Rate Was 20.28% in January 2021

Some cards advertised higher purchase, cash advance APRs

Stack of multicolored credit cards close-up view with selective focus.
••• alexialex / Getty Images

This post is for historical reference.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 inched up to 20.28% following a number of APR increases in January 2021, according to data collected by The Balance.

After months of inactivity, some of the credit cards started advertising higher interest rates. U.S. Bank and First National Bank of Omaha each boosted the APRs they charge on a handful of their credit cards. Meanwhile the Federal Reserve held its benchmark rate steady, which often influences how credit card interest rates move.  These banks may have adjusted interest rates to protect their bottom lines, as lending standards eased but uncertainty about the economy and consumer finances continued.  

Despite January’s APR hikes, the average credit card APR was still lower than it was a year prior.

Key Takeaways

  • The average APR on credit card purchases was 20.28%, up 0.08 percentage points since December 2020, but down 0.96 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
  January 2021 Average APR December 2020 July 2020 January 2020
All Credit Cards 20.28% 20.20% 20.21% 21.24%
Business Credit Cards 17.92% 17.81% 17.93% 19.10%
Student Credit Cards 18.83% 18.83% 18.78% 20.61%
Cash-Back Credit Cards 19.09% 19.09% 19.12% 20.23%
Travel Rewards Credit Cards 19.26% 19.18% 19.21% 20.47%
Secured Credit Cards 20.29% 19.87% 20.14% 21.22%
Other 22.31% 22.39% 22.15% 21.65%
Store Credit Cards 24.24% 24.24% 24.17% 25.39%

What Happened in January 2021

Through the latter half of 2020, credit card interest rate changes were rare. The Balance recorded more APR changes than usual in January, as a few banks tweaked the interest rates advertised online for prospective cardholders. 

U.S. Bank, FNBO Raised Advertised Purchase APRs of Several Cards 

Six U.S. Bank credit cards advertised higher purchase APRs, and those offer changes were significant enough to nudge our overall average credit card APR up:

 Credit Card  Old Purchase APR  New Purchase APR in January 2021
U.S. Bank Visa Platinum 13.99%-23.99%, variable 14.49%-24.49%, variable
U.S. Bank Altitude Reserve Visa Infinite Card 16.24%, variable 16.99%-23.99%, variable
U.S. Bank Secured Visa Card 18.99%, variable 25.99%, variable
U.S. Bank Business Leverage Visa Signature Card 16.49%, variable 15.99%-20.99%, variable
U.S. Bank Business Cash Rewards World Elite Mastercard 11.99%-22.99%, variable 13.99%-22.99%, variable
U.S. Bank Business Platinum Card 9.99%-17.99%, variable 11.99%-20.99%, variable

The First National Bank of Omaha (FNBO) also increased the interest rate ranges of its two Best Western hotel-branded rewards cards in January: the Best Western Rewards Mastercard and the Best Western Rewards Premium Mastercard. 

U.S. Bank did not respond to multiple requests for comment regarding its set of card offer updates. Industry experts told The Balance that it’s not unusual for banks to periodically update card terms and conditions. Rising card costs now could indicate that lenders harbor fears about cardholders’ ability to repay in the future, given the uncertain finances many borrowers still face. Banks are optimistic but cautious, and interest rates may reflect that.

Cash Advance Costs Rose

The Balance also recorded a number of higher cash advance APRs in January, once again based on U.S. Bank offer updates. The issuer upped the cash advance interest rates listed in the terms of eight cards up to 25.99%. Those changes were enough to bump our average cash advance APR up a hair (0.05 percentage points) compared the prior month, too. 

While updates made by one card issuer aren’t concrete signs of a trend, it’s notable that U.S. Bank upped the cash advance costs on so many cards, especially since the average cash advance rate APR fell last year. Banks may be more willing to lend, but these APR changes indicate there may be some hesitancy to give consumers easy access to extra funds without charging more to offset potential losses.

“A cash advance with a credit card gives you the ability to use the credit card the same way you would your bank ATM card, but the difference here is that it’s not your money—it’s the banks,” said Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling (NFCC). “Cash advances are perceived as a risky move by the lender, so to offset their risk in the event you get yourself into a debt situation you can’t pay back, they might slap a higher interest rate on that transaction.”

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

Nearly one-quarter of the cards we tracked for this report offered new cardholders introductory purchase APRs.

  • Typical offer length: On average, these offers lasted about 12 months. It’s rare to find purchase APR deals longer than 15 months. Only five cards in our database offered 0%new-cardholder deals longer than 15 months in January 2021. 
  • Best 0% purchase APR deal: The longest introductory purchase rate offer 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 in January. 
  • Rate after no-interest period ends: Cards with promotional purchase APRs charged an average ongoing rate of 18.33%, slightly higher than prior months following the interest rate increases we recorded in January.

Balance Transfer APR Deals

There were fewer promotional balance transfer rates available now compared to a year earlier, but about 26% of the cards tracked by The Balance currently offered such deals to new cardholders in January 2021.

  • 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 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 recommended applicants have a good or excellent credit score in January 2021. 
  • Rate after intro period ends: We found the average ongoing APR of balance transfer transactions was 17.96%.

Cash Advance Rates

Nearly 89% of the cards we tracked allowed 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%, charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.

Penalty Interest Rates

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 in January 2021, the average default rate was 28.58%, 8.3 percentage points higher than the average purchase APR that month
  • Highest penalty APR: 29.99% was a popular penalty, as 51 cards in our database charged it.

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 23.88%, 4.62 percentage points above the average APR of cards marketed to those with good/excellent credit (19.26%).

Methodology

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 January 2021. Our data pool included offers from 43 issuers, including the largest national banks. We tracked 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.