Average Credit Card Interest Rates Inched Up in January 2020

Issuers raised interest rates as the national credit card debt balance soared

stack of credit cards, one has EMV chip

This post is for historical reference.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 21.28% in January 2020, up a slight 0.02 percentage points from the prior month, according to data collected by The Balance.

In July 2020 we updated our data collection and analysis to better reflect how and where consumers use their credit cards. These changes affected how we calculate average credit card rates and may not be reflected in the average rates published prior to August, 2020.

For several months, credit card annual percentage rates (APRs) inched down as issuers responded to three consecutive interest rate cuts by the Federal Reserve that began in August 2019. That trend changed course as the decade came to a close.  

The Balance watched several banks increase the purchase APRs on some of their cards, including some marketed toward those with fair or bad credit. Average credit card interest rates were already high, and they became even higher as consumers amassed more card debt.

Key Takeaways

  • The average APR on credit card purchases was 21.28%.
  • Store credit cards had the highest average interest rate.
  • Business credit cards had the lowest average interest rate.
  • Cash-back 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 determines a credit card interest rate. To learn how we categorized cards based on type for this report, see the methodology at the bottom of this page. Other deciding factors include your credit standing and the type of transaction you use the card for (more on that later in the “Average Interest Rates by Credit Card Transaction Type” section).

Seasonal Rate Focus: Balance Transfer APRs

In January 2020, most credit cards (about 75% of all cards in our database) allowed cardholders to request balance transfers, and nearly one-third (about 31%) offered introductory balance transfer rates.

Most cards with promotional balance transfer rates gave cardholders at least one year to pay off a balance transfer under a significantly reduced or 0% APR, and some cards offered even more time. Only six cards in the survey advertised promotional balance transfer rate offers that lasted less than 12 months. Overall, the average length of balance transfer rate promotions was about 14 months. 

Average Interest Rates by Credit Card Transaction Type

Purchase APR Deals

The Balance found purchase APR deals were easy to come by in January 2020: More than one-quarter of the cards tracked for this report offered new cardholders introductory purchase APRs. 

  • On average, these offers lasted about 12 months.
  • The longest introductory purchase rate offer was an impressive 36 months, available on the SunTrust Prime Rewards Credit Card. 
  • Cards with promotional purchase APRs charged an average ongoing rate of 19.14%.

Cash Advance Rates

Nearly 88% of the cards we tracked in January 2020 allowed cash advances.

  • The average APR on cash advances was 26.27%.
  • The highest cash advance APR we found was 36%, charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.

Penalty Interest Rates

Not all credit cards charge penalty rates, but 105 of the cards surveyed for this report (about 35%) did. The average penalty APR in our card sample was a steep 29.04%—7.76 percentage points higher than the average purchase APR in January 2020. The Balance found penalty rates were high as 31.49%, which was charged by four cards issued by HSBC: HSBC Cash Rewards Mastercard, HSBC Advance Mastercard, HSBC Premier World Mastercard, and the HSBC Premier World Elite Mastercard.

What Changed: APR Increases Not Driven by Fed Rate Hikes

In 2019, credit card issuers lowered APRs in response to three consecutive Federal funds rate cuts from the Federal Reserve. The Fed left its baseline rate (which impacts the variable APRs of financial products like credit cards) unchanged in December, and then The Balance watched some interest rates rise. That trend has continued in the new year, too.

Between Jan. 1 and Jan. 31, 2020, five card issuers raised the purchase APRs of some of their cards for new applicants: Capital One, Chase, Citi, HSBC, and U.S. Bank. 

Card issuers can revamp offers at their discretion, so these adjustments weren't out of line but were worth noting, especially by consumers with mediocre credit. The Balance noticed that several credit card APR increases in January were on cards marketed toward those with subprime credit scores, which is a term lenders use to describe borrowers identified as a higher risk because they have low credit scores. 

In fact, based on credit card offer data tracked by The Balance, the average purchase APR of credit cards marketed to those with fair or bad credit (a 669 FICO score or lower) had trended up since at least September 2019, despite Fed rate decreases. Meanwhile, the average APR of cards aimed at consumers with good or excellent credit scores (a 670 FICO score or higher) had gone down.

These findings aligned with credit card issuer behaviors observed by the Federal Reserve last year. In the fourth quarter of 2019, the Fed reported a trend in banks increasing minimum credit score requirements, tightening credit limits, and reducing the number of approved credit card applications. However, the demand for credit was still strong, indicating consumers were comfortable racking up debt instead of spending within their means, which is a red flag for lenders. 

Methodology

This monthly report was based on credit card offer data collected and monitored on a rolling basis by The Balance for 304 U.S. credit cards between Jan. 1-31, 2020. Our data pool included offers from 42 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. 

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 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, student, secured, and store. This includes cards that offer very few—if any—features.