What Is The Average Credit Card Interest Rate?

Credit cards are excellent ways to purchase items given the buyer's protection, interest free loan, and points it generates. The average credit card interest rate is around 16% as of Nov. 2020. APRs have come down several percentage points since 2019 because the Federal Reserve has been cutting rates to combat the coronavirus and recession.

Your own credit card interest rate depends on the level of your credit. The lower your credit score, the higher your credit card interest rate and vice versa.

Average Credit Card Interest Rate APRs 2020
Average Credit Card Interest Rate APRs by Credit Card Type, Nov 2020

Credit card interest rates are largely effected by the Federal Reserve's interest rate policy. The Fed has raised interest rates nine times since 2015 and only finally cut the Fed funds rate by 0.25% in 2019. Rates have come down even further in 2020.

Average Credit Card Interest Rate In A Graph

Here is a graphical representation of the average credit card interest rate according to the Federal Reserve Bank of St. Louis (FRED), which is the economic resource center for the Fed.

Average credit card interest rate

As you can see from the chart, the average credit card interest rate reached a 5-year high in 2019, which has followed the Federal Reserve's rate hike regime.

APR vs. Interest Rate

What Is The Average Credit Card Interest Rate?

APR, or Average Percentage Rate, is a more specific term that describes how much interest a balance will accrue over the course of a year. But interest is assessed daily, so a credit card’s interest rate is its APR divided by 365 (days in a year).

If your APR is 15%, for example, you would be charged interest at a rate of 15%/365 per day. That is, if you have a balance you don’t pay in full by the due date.

Other Average Credit Card Interest Rates

The average rates discussed above are so-called regular APRs. They apply to purchases and balance transfers under normal circumstances. But there are several other kinds of interest rates you should be aware of.

Here are the other average credit card interest rates:

  • Purchase Intro APR: 0% for 10.59 months – Usually 0%, this promotional rate lasts for a limited amount of time before the regular APR kicks in.
  • Balance Transfer Intro APR: 0% for 12.06 months – Usually 0% and sometimes offered for the same length of time as the purchase intro APR, this promo rate applies to balances transferred from another credit card or loan.
  • Penalty APR: 26.18% – You’ll only see this interest rate if you fail to make your minimum payments.
  • Cash Advance APR: 21.02% – You can use your credit card like a debit card to get money from an ATM. But interest will start accruing immediately, and you’ll be hit with a hefty fee.

Three Ways To Get A Lower Credit Card Interest Rate

  1. Improve your credit. A better credit score can lead to much lower interest rates as well as higher odds of approval for 0% credit cards. Once you get your credit score to above 760, you should get the lowest credit card interest rate available.
  2. Comparison shop. It’s very easy to compare credit cards based on their regular and introductory interest rates, among other things. And if you know what your credit score is, you’ll have a sense of what rate you deserve.
  3. Take advantage of 0% offers. Using 0% introductory APR credit cards are a great way to save on interest. Just make sure to pay the full balance BEFORE the introductory offer is due, otherwise, you will pay the FULL interest on your purchases during the intro period.

Use Credit Cards Judiciously

The average credit card rate is extraordinarily high at over 16%. In comparison, the risk-free bond yield is currently less than 1%. A 16X higher rate is like highway robbery, so absolutely DO NOT carry a credit card balance.

Use a credit card for buyer's insurance, convenience, points, and an interest free loan of 30 days. But absolutely do not carry a revolving balance. Not even the great Warren Buffett has beaten the average credit card APR during his illustrious career.

The best way to build wealth is to save aggressively and invest wisely. Track your finances with a free, award-winning personal finance app like Personal Capital so you always know where your money is.

Personal Capital Retirement Planner Free Tool
Personal Capital's Free Retirement Planner

Invest in stocks in a proper asset allocation over the long term. Invest in real estate across the country to take advantage of limited land and ever-rising inflation.

I'm personally investing aggressively in the heartland of America because valuations are cheaper, net rental yields are higher, and there's a multi-decade demographic shift away from expensive coastal cities. Fundrise is the leading real estate crowdfunding platform today. It's free to sign up and explore. Below are some examples of its deals.

Fundrise Heartland eREIT Investment Examples

Over a 10+ period, you will see your net worth grow. Aggressively using credit cards to finance your lifestyle is the exact opposite of what you should do.

Once you've got a large enough net worth with steady amounts of passive income, you'll never need to worry about paying sky-high credit card interest again!

The Best Rewards Credit Cards

If you're looking for an excellent rewards credit card, here are the top three rewards credit cards today.

Capital One Quicksilver Rewards Credit Card

The Capital One Quicksilver Rewards Credit Card is the best cash back credit card today. Cardholders earn 1.5% cash back on all purchases without any spending caps.

No spending caps is key because many other credit cards will stop accruing rewards points when you spend more than a specified dollar amount in order to limit how much you can earn in cash back rewards.

The average cash back credit card only provides 1% cash back on all purchases. Therefore, the Quicksilver card provides a 50% greater reward.

Key Benefits

  • Welcome Bonus: $200 cash bonus after spending $500 on purchases within three months
  • Rewards Rate: Flat-rate 1.5% cash back on all purchases
  • No foreign transaction fees
  • Annual Fee: $0
  • Introductory 0% APR for the first 15 months
  • Credit Score Needed: Good to Excellent
CapitalOne Quicksilver Cash Rewards Credit Card

Capital One Savor Cash Rewards Credit Card

The Capital One SavorOne Rewards Credit Card is a tiered cash back rewards credit card that offers an impressive 3% on dining and entertainment without any spending caps. That’s huge and will really add up over time.

My wife and I go out to eat three times a week on average and put everything on our dining and entertainment rewards credit card. Our food budget is roughly $2,000 a month, which means we are able to get a couple free dinners every month thanks to our rewards credit card. We make it a fun date night each time.

Key Benefits

  • Unlimited 3% cash back on dining and entertainment
  • 2% cash back at grocery stores, excluding superstores, with no spending caps
  • Unlimited 1% cash back on gas and all other purchases
  • Get a $200 cash rewards bonus if you spend $500 in the first 3 months
  • No annual fee

Chase Freedom Flex Rewards Credit Card

I’ve been a happy Chase customer and cardmember for over 10 years. I’ve traveled to over 40 countries during this time period. And I love using my Chase Freedom Flex Rewards Card to rack up travel rewards.

I’ve used tens of thousands of rewards to travel and take my wife to Hawaii, our favorite holiday destination in the whole wide world!

Travel is really one of the key joys in life. The more we can travel, the more we will experience and appreciate new cultures and lifestyles. The more we can experience and appreciate new cultures, the more harmony there will be in this world.

Key Benefits

  • Sign up bonus: Earn a generous $200 bonus after you spend $500 on purchases in your first 3 months from account opening. 
  • High cash back rates on select categories: For example, get 5% cash back on grocery store purchases of up to $12,000 spent in the first year. 
  • Cash back promotions: 5% cash back on up to $1,500 in purchases in rotating categories each quarter 
  • 5% cash back on travel purchased in the Chase Ultimate Rewards® portal, 
  • 3% cash back on eligible dining at restaurants and drugstore purchases.
  • 1% unlimited cash back on everything else
  • Annual fee: $0
  • Intro APR: You get 0% intro APR for 15 months from account opening on purchases.
  • Credit score needed: good to excellent
Chase Freedom Flex credit card

Pay off Your Debt Faster

If you don’t have enough cash, getting a personal loan from Credible is a good place to start.

Personal loan rates have come down significantly in comparison to the average credit card interest rate. Thus, if you have expensive credit card debt, consider consolidating your debt into a lower interest-rate personal loan.

Credible has the most comprehensive marketplace for personal loans. Up to 11 lenders compete for your business to get you the best rate. Get real personal loan quotes in just two minutes after you fill out an application. Check out Credible today and see how much you could save.

For further suggestions on saving money and growing wealth, check out my Top Financial Products page.

In addition, if you enjoyed this article and want to get more personal finance insights and tips, please sign up for the free Financial Samurai newsletter. You’ll get access to exclusive content only available to subscribers.