Despite the Federal Reserve halting its rate hikes since December 2024, credit card interest rates have continued to climb. In June, the average APR on credit cards reached its highest level since December of the previous year, with rates now averaging just over 20% and new card offers reaching 24.3%.
Experts warn that these “crippling” rates significantly accelerate debt accumulation for consumers. This increase comes even as the Fed has made multiple rate cuts in 2024, showing a disconnect between the central bank’s actions and credit card issuers’ decisions.
APRs Rise Despite Fed Cuts as Banks Manage Risk and Market Uncertainty
Credit card interest rates remained relatively stable following the Credit CARD Act of 2009, but began climbing steadily after the Fed began raising rates in 2015. Over the past decade, APRs have doubled from around 12% to over 20%. Most credit cards have variable rates tied to the Fed’s benchmark, meaning Fed hikes have a near-immediate effect.
The 11 rate hikes starting in March 2022 triggered another surge. However, even after the Fed stopped raising rates and introduced cuts in 2024, banks have kept increasing APRs, suggesting other market forces are at play.
Credit Card Rates Climb Past 20% Even as Fed Cuts Fail to Slow LendersBanks are raising APRs not solely due to Fed actions but also as a risk management strategy. Lenders are becoming cautious amid uncertain economic conditions and rising delinquencies, aiming to protect themselves against potential defaults. Additionally, consumers seeking credit during volatile times increase banks’ risk exposure. This combination of higher demand for credit and concerns about borrower reliability leads issuers to maintain or raise rates, especially for riskier applicants.
Smart Credit Management Shields Borrowers from High APRs and Rising Interest Burdens
Consumers who carry credit card balances are the most affected by high APRs, while those who pay off their cards monthly are shielded. Even if the Fed were to significantly lower its benchmark rate, it would only marginally reduce credit card APRs, not enough to ease the burden meaningfully.
Therefore, experts recommend practical steps like transferring balances to 0% interest cards or using personal loans with lower interest to consolidate debt. These methods can provide more immediate and tangible relief than waiting for broader economic shifts.
Borrowers with good credit scores still hold significant power in negotiating better rates or accessing lower-interest credit. Those who manage their credit responsibly — by paying on time, keeping balances low, and staying within 30% of their credit limit — can improve their credit profile, qualify for better card offers, and even benefit from rewards programs.
Long-term financial health depends more on personal credit behavior than on macroeconomic policy changes, making credit management a vital tool in countering rising APRs.
