The median rate of interest across all credit cards in the Investopedia card database for January 2022.
The median credit card interest rate for all credit cards in the Investopedia database currently stands at 19.49%, based on average advertised rates across several hundred of the most popular card offers in the market. Investopedia’s average rate data differs markedly from the overall credit card rate average tracked by the Federal Reserve (the Fed), which was most recently quoted at 14.54% at the end of Q3 2021, due to the fact that the Fed samples a relatively limited number of banks and only considers the low end of the interest rate range advertised by card issuers. Given that the average FICO credit score in the U.S. was 711 in 2020, up from 703 in 2019 according to Experian, Investopedia believes it is more accurate to track the median midpoint value of advertised credit card interest rate ranges rather than the low end as a 711 credit score would not qualify for the best rates available as implied by Fed average rates.
- The median available interest rate from Investopedia's database of over 300 cards is 19.49%
- Credit card interest rates are largely determined by credit quality of the applicant
- The best credit card rates are reserved for those with excellent credit
Credit card interest rates are expected to remain largely unchanged for the foreseeable future, as most card issuers employ variable interest rates that are indexed to the Federal Reserve’s Prime Rate. However, the lower and upper ends of available card rates can change from month to month depending on competitive pressures and individual banks' risk policies. After having cut rates twice in 2019 for general economic reasons and then again in March of 2020 in an attempt utilize monetary policy to jump-start economic activity amid the initial COVID-19 crisis, the Federal Reserve is not projected to make further changes to its benchmark federal funds interest rate and had signaled a reluctance to increase the Fed Funds Rate for the foreseeable future, potentially until 2023. However, continued inflationary pressure due to supply chain issues has significantly raised the consumer price index in Q4 of 2021 and the Fed has changed its policy direction, indicating up to three expected rate hikes in 2022 to tap the brakes on economic expansion. A wide variety of consumer loans, including credit cards, are tied to movements of the Fed funds rate which is the mechanism the Fed employs to stimulate or slow the magnitude of lending depending on economic conditions.
Several factors influence how individual credit card rates are set, the most important of which is credit quality, with those with excellent credit receiving the lowest rates and those with no credit or bad credit receiving the highest rates. Other factors include the type of credit card and the risk-based pricing policies of the specific credit card issuer.
Investopedia tracks average advertised rates for new applicants, which are typically quoted as a range for each card product, across more than 300 card offers, which are shown below broken out by credit quality, card type, and card issuer.
Interest Rates by Credit Quality Types
Different ranges of credit quality can vary depending on the type of score used but the most popular credit score used by credit card lenders is the FICO score.
Different ranges of credit quality can vary depending on the type of score used but the most popular credit score used by credit card lenders is the FICO score. Credit quality is defined according to the FICO score ranges for each credit quality level:
|FICO Credit Score Ranges|
For those needing to build or rebuild their credit it's critical to begin actively using credit responsibly - which means always paying bills on time and keeping utilization below 30% of credit lines. A secured credit card can be a good place to start if you don't already have credit in your name. It can take time but responsible credit use can produce positive results after as little as six months and builds over time.
Interest Rates by Credit Card Types
- Rewards: Credit cards that offer points, miles, or cash back on purchases
- Student: Credit cards designed for for the limited credit history and credit education needs of college students
- Secured: Credit cards that require a security deposit that serves as an initial credit line
- Business: Credit cards designed for small business owners providing segregation of business expenses, working capital and often rewards and discounts on business-related purchase categories.
Interest Rates by Issuer
Credit card issuers have different risk-based pricing policies that cause variation in the ranges of interest rates they advertise and eventually assign to customers based on approved applicants' credit scores.
Prime Rate Trend
Credit card interest rates are predominantly indexed to the Prime Rate along with a margin which varies at the card product level and individual account holder's credit quality. The Prime Rate currently stands at 3.25%, the lowest level since Q4 2015 and has been adjusted downward from its decade-high of 5.50% reached in Q4 2018 after Federal Reserve economic stimulus actions in Q3 and Q4 2019 and again in March 2020. Since the last change in March 2020 the Prime Rate has remained unchanged.
Delinquency Rate Trend
Credit card delinquency rates, defined as accounts that are 90 days or more overdue, has been below 3% in recent years and had fallen by nearly 30 basis points between Q1 and Q2, and by another 38 basis points between Q2 and Q3 2020, likely due to decreased card spending during the pandemic and the positive impact of stimulus payments on paying down card debt. However, delinquency rates ticked back up slightly (by 10 basis points) in Q4 2020, possibly indicating a new inflection point in the recent positive trending.
Credit Card Debt Trend
Total consumer revolving credit card debt dropped below $1 trillion in the most recent quarter for the first time since 2017, reflecting the impact of COVID-19 on consumer credit card spending and outstanding credit card debt. The latest monthly data from the Fed shows January 2021 total credit card outstanding debt dropping nearly $10 billion from the end of Q4, to $965.1 billion.
Investopedia tracks individual credit card rates on more than 300 cards offered to the public from 32 of the nation’s largest banks and issuers. Most credit card rates are advertised in the form of a range from low to high depending on the applicant’s credit score. In determining average rates by credit quality, card type, card type, or card issuer, Investopedia calculates the average mid-point of advertised interest rate ranges and also calculates the average of the lower and upper ends of rates that are expressed in ranges.