Average credit card interest rates: Week of February 3, 2021

The average credit card interest rate is 16.12%

The national average credit card APR rose again this week, according to the CreditCards.com Weekly Credit Card Rate Report.

The average APR for brand-new cards ticked up to 16.12% after the retailer L.L. Bean increased the minimum APR on its co-branded card, the L.L. Bean Mastercard, by a full percentage point. The lowest rate that outdoor recreation enthusiasts can get on L.L. Bean’s retail rewards card is now 14.99%.

L.L. Bean also increased the card’s maximum APR by four percentage points, causing the range of possible APRs that L.L. Bean fans can expect to substantially expand. For example, qualifying applicants with the lowest credit scores may be assigned an APR as high as 23.99%, which is nine points higher than the card’s minimum rate. Previously, the difference between the L.L. Bean card’s lowest possible rate and its highest rate was just six percentage points.

L.L. Bean’s rate hike also caused the average maximum card APR to rise this week. According to CreditCards.com’s latest rate calculation, for example, the average U.S. credit card now advertises a maximum APR of 23.62%, up from an average of 23.58% last week.

Every week, CreditCards.com tracks APR advertisements for a representative sample of 100 U.S. credit cards.

To calculate the national average credit card APR, we only consider a card’s lowest possible interest rate. However, most U.S. credit cards advertise a wide range of possible rates, including maximum interest rates that are often 5 to 10 points higher than a card’s minimum rate.

Credit card lenders don’t typically advertise how many of their applicants qualify for a card’s lowest rate. But generally, lenders typically reserve their lowest rates for just a small fraction of applicants. Meanwhile, others are assigned APRs that are far higher than the advertised minimum.

For example, credit card applicants may be assigned a card’s lowest advertised rate or its highest. Or they may be assigned an APR that falls somewhere in the middle of a card’s lowest and highest interest rates. As a result, even cardholders with good to excellent credit may be assigned an APR that is several points higher than the national average.

According to CreditCards.com’s data, for example, the average median card APR – which is the middle rate that many new cardholders are assigned – is currently 19.87%. That’s nearly four points higher than the average minimum credit card APR.

Despite rate hikes, average card APRs are still near a three-year low

Average rates on new card offers are higher now than they have been in months. However, compared to a year ago, average card APRs are still unusually low – particularly compared to the past three years.

The average minimum credit card APR, for example, is currently down by 1.19 percentage points compared to a year ago when the average new card offer advertised a 17.31% interest rate. In February 2018, the average new card APR advertised a 16.41% interest rate.

The last time average minimum card APRs hovered closer to 16% was in 2017.

This year’s lower interest rates are largely due to rate cuts by the Federal Reserve. When the Federal Reserve revises its benchmark interest rate, the federal funds rate, most credit card issuers eventually match the Fed’s rate change by revising new card APRs by the same amount.

In March 2020, the Fed slashed its benchmark interest rate, the federal funds rate, to near zero effectively erasing several years of gradual rate increases that the Fed had implemented between 2015 and 2016. As a result, the national average card APR tumbled dramatically last spring as the majority of lenders tracked by CreditCards.com matched the Fed’s rate cuts.

Since then, average card APRs have remained near a three-year low, staying within rounding distance of 16% for 10 straight months.

See related: How do credit card APRs work?

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.12% 16.11% 16.03%
Low interest 12.90% 12.88% 12.83%
Cash back 15.94% 15.91% 16.09%
Balance transfer 13.93% 13.93% 13.93%
Business 14.22% 14.22% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.56% 15.56% 15.48%
Rewards 15.81% 15.80% 15.82%
Instant approval 18.47% 18.47% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: February 3, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com