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As the Federal Reserve became less and less accommodative over the last few years, average credit card interest rates continued to move higher. And considering most credit card options use a variable interest rate structure, it’s easy to see the direct correlation.
Citing the latest data from the US Federal Reserve – as of 2018:Q4 – US average credit card interest rates currently sit at 14.73% and 16.86% respectively.
Check out the table below:
| Year: | Average Interest Rate Across All Accounts: | Average Interest Across Accounts Assessed Interest: |
| 2018:Q4 | 14.73% | 16.86% |
So what is the difference between the two figures?
Well, the average interest rate across all accounts applies to all cardholders: accounts where payments are made in full each month and where rollovers occur. Conversely, the accounts assessed interest applies only to accounts that have incurred interest charges.
Since 2014, US average credit card interest rates have increased by a spread of 2.86% across all accounts and a spread of 3.67% across accounts assessed interest.
Citigroup is the largest US credit card lender with 169.188 billion in credit card loans on its balance sheet.
Combined – Citigroup, JP Morgan and Capital One – control over 52% of the American credit card market.
In the all-rewards category, Discover offers the lowest average credit card APR at 14.24%. The figure is 1.81% less than its next closest competitor (U.S. Bancorp). However, Citigroup and JP Morgan offer the longest average introductory APR period of 15 months.
In the cash back category, Discover offers the lowest average credit card APR at 14.24%. The figure is 1.5% and 1% less than Citigroup and American Express. However – at 18 months – Citigroup offers the longest average introductory APR period.
In the business category, U.S. Bancorp and Bank of America offer the lowest average APRs of 13.74% and 13.93% respectively. Both are more than 1.31% less than their next closest competitor. As well, JP Morgan, Discover and U.S. Bancorp each offer the longest average introductory APR period of 12 months.
In the low-interest category, Discover and Capital One lead the way with an average APR of 14.24%. However, the rate gap is much smaller with Wells Fargo and U.S. Bancorp only 50 basis points (0.50%) behind. At 18 months U.S. Bancorp offers the longest average introductory APR period with its next closest competitor nearly four months behind.
Not all institutions offer secured credit cards, but those that do have average APRs that range from 21.24% to 25.24%. Wells Fargo and U.S. Bancorp (21.24%) offer the lowest average secured APR. As well, none of the institutions in our study offer introductory APRs for secured cards.
Across all categories, penalty APRs range from 29.99% to 31.65% with Capital One’s business segment sporting the highest penalty rate. Its penalty rate is 16.41% above the low-end of its average business APR range and 6.40% above the high-end of its average business APR range.
Over the last four-years, US average credit card interest rates have grown by a spread of 2.86% across all accounts and a spread of 3.67% across accounts assessed interest.
| Year: | Average Interest Rate Across All Accounts: | Average Interest Across Accounts Assessed Interest: |
| 2014 | 11.87% | 13.19% |
| 2015 | 12.09% | 13.66% |
| 2016 | 12.35% | 13.56% |
| 2017:Q4 | 13.16% | 14.99% |
| 2018:Q4 | 14.73% | 16.86% |
ElitePersonalFinance analysis of Federal Reserve Data
And considering total credit card debt in America currently sits at 799 billion – an increase of 42% since 2011 – the numbers indicate that consumer indebtedness and interest payments are becoming a larger portion of American household finances.
To really understand how average credit card APRs behave across the United States, we analyzed balance sheets of the nine largest credit card lenders in America. To find the figures, we combed through each company’s latest annual report and analyzed their current loan portfolios.
Our analysis shows:
| Institution: | Outstanding Credit Card Loans (Billions): |
| Citigroup Inc. | 169.188 |
| JP Morgan Chase & Co. | 156.632 |
| Capital One Financial Corp. | 116.361 |
| Bank of America Corp. | 98.338 |
| Synchrony Financial | 89.994 |
| American Express Company | 81.854 |
| Discover Financial Services | 72.876 |
| Wells Fargo & Co. | 39.025 |
| U.S. Bancorp | 23.363 |
ElitePersonalFinance analysis of SEC Filings
As the largest credit card lender in America, Citigroup has over 169 billion in outstanding credit card loans on its balance sheet.
Not far behind is JP Morgan and Capital One.
With over a 156 billion and 116 billion in credit card loans respectively – combined – the three major players control over 52% of the American credit card market.
Continuing with our theme, next we analyzed the official websites of the nine major lending institutions to assess how average credit card APRs compare across both institution and type.
But before we get into the details, let’s define APR.
As an abbreviated term for Annual Percentage Rate (APR), APR is your cost of borrowing for credit card purchases. While all institutions break down the percentage to generate a daily periodic rate – which we’ll explain in greater detail later – APR acts as a proxy for the cost of late payments.
Now, what about the percent ranges below?
Well, like any other lending product, institutions determine your credit card APR by analyzing your creditworthiness. Borrowers with the highest credit scores receive the lowest APR, while those with the lowest credit scores receive the highest APR.
The ranges you see represent the high and low for each category.
| All-Rewards: | Cash Back: | Business: | Low-Interest: | Secured: | |
| Citigroup Inc. | 17.38% – 25.99% | 15.74% – 25.74% | 17.99% – 25.99% | 15.74% – 25.74% | 24.74% |
| JP Morgan Chase & Co. | 18.11% – 25.33% | 17.37% – 25.43% | 17.14% – 23.34% | 16.49% – 24.49% | – |
| Capital One Financial Corp. | 16.29% – 25.54% | 16.41% – 26.07% | 15.24% – 25.24% | 14.24% – 24.24% | 24.99% |
| Bank of America Corp. | 17.07% – 25.52% | 16.57% – 26.07% | 13.93% – 23.68% | 15.24% – 25.24% | 25.24% |
| Synchrony Financial | 20.10% – 27.69% | 22.24% – 28.24% | 17.15% – 25.15% | 16.49% – 24.49% | – |
| American Express Company | 16.84% – 26.68% | 15.24% – 26.24% | 16.85% – 24.91% | 15.24% – 26.24% | – |
| Discover Financial Services | 14.24% – 25.24% | 14.24% – 25.24% | 15.24% – 23.24% | 14.24% – 25.24% | 25.24% |
| Wells Fargo & Co. | 16.44% – 27.64% | 16.24% – 28.24% | Prime + 5.99% – Prime + 17.99% | 14.74% – 27.24% | 21.24% |
| U.S. Bancorp | 16.05% – 25.93% | 16.24% – 25.74% | 13.74% – 23.99% | 14.74% – 25.74% | 21.24% |
When breaking down the data from the all-rewards category – which includes all credit cards offering points or cash rewards – we found Discover offers the lowest average APR. At a low-end range of 14.24%, its APR is 1.81% less than its next closest competitor – U.S. Bancorp.
The cash back category presents a similar story. With an average APR that’s 1.5% and 1% below Citigroup and American Express – both laggards have work to do to catch up to Discover.
When it comes to the business segment, U.S. Bancorp and Bank of America lead the way. With low-end average APRs of 13.74% and 13.93%, both credit card solutions are more than 1.31% less than the next closest competitor.
In the low-interest category, Discover and Capital One have the best options with low-end average APRs of 14.24%. However, here, the rate gap is much smaller with both Wells Fargo and U.S. Bancorp only trailing by 50 basis points (0.50%).
Last is the secured category.
While not all lenders in our study offer secured cards, the ones that do have average APRs that range from 21.24% to 25.24%. With Wells Fargo and U.S. Bancorp offering the lowest rates, they’re your best options for obtaining a secured credit card.
Just as our nine US institutions engage in APR competition, they also compete with their introductory APR periods.
But first, what is an introductory APR period?
To define the term, Introductory APR Periods are a designated number of months with 0% interest. They represent how long you can carry-forward credit card balances without any interest charges. Used as a way to attract new clients, introductory APR periods can offer a great way to get your finances in order.
However, like all good things, they don’t last forever.
Check out the statistics below:
| All-Rewards: | Cash Back: | Business: | Low-Interest: | Secured: | |
| Citigroup Inc. | 15.00 | 18.00 | – | 14.00 | – |
| JP Morgan Chase & Co. | 15.00 | 15.00 | 12.00 | – | – |
| Capital One Financial Corp. | 12.00 | 15.00 | 9.00 | 12.00 | – |
| Bank of America Corp. | 12.00 | 12.00 | 8.33 | – | – |
| Synchrony Financial | – | – | – | – | – |
| American Express Company | 13.80 | 14.00 | 10.00 | 13.80 | – |
| Discover Financial Services | 14.00 | 14.00 | 12.00 | 14.00 | – |
| Wells Fargo & Co. | 14.40 | 12.00 | 9.00 | 13.50 | – |
| U.S. Bancorp | 12.75 | 12.00 | 12.00 | 18.00 | – |
– Credit Cards without introductory APR periods are excluded from calculated averages
While we see much less variance here than with our average APR numbers above – in the all-rewards category – Citigroup and JP Morgan offer the longest average introductory APR period of 15 months.
In the cash back category – with an average of 18 months – Citigroup stands on its own.
It’s interesting that while its average APRs are at the high-end in many categories above, its introductory APR periods are most attractive. Again, considering it’s the largest US credit card lender – with over 169 billion in outstanding loans – it seems to have found a reliable way to attract and retain customers.
For the business segment – across all lenders – grace periods are noticeably less than their consumer counterparts. With JP Morgan, Discover and U.S. Bancorp each offering an average introductory APR period of 12 months, they present the best options for business owners.
Considering none of the institutions in our study offer introductory APR periods for secured cards, our last category is low-interest. At 18-months, U.S. Bancorp offers the longest average grace period with its next closest competitor nearly four months behind.
Applied to accounts where balance payments are 60 or more days late, Penalty APRs are used to compensate lenders for unpredictable borrowers. While not all institutions in our study implement penalty APRs, those that do apply interest rates substantially above their average ranges.
| All-Rewards: | Cash Back: | Business: | Low-Interest: | Secured: | |
| Citigroup Inc. | 29.99% | 29.99% | 29.99% | 29.99% | 29.99% |
| JP Morgan Chase & Co. | – | – | 29.99% | – | – |
| Capital One Financial Corp. | – | – | 31.65% | – | – |
| Bank of America Corp. | 29.99% | 29.99% | – | – | – |
| Synchrony Financial | – | – | – | – | – |
| American Express Company | Prime + 25.99% | Prime + 25.99% | Prime + 25.99% | Prime + 25.99% | – |
| Discover Financial Services | – | – | – | – | – |
| Wells Fargo & Co. | – | – | – | – | – |
| U.S. Bancorp | – | – | 29.99% | – | – |
With noticeable consolidation among the numbers, the highest penalty APR – across all institutions and categories – falls within Capital One’s business segment. Late payments are subject to 31.65% interest – which is 16.41% above the low-end of its average business APR range and 6.40% above the high-end of its average business APR range.
As you can see, late payments can be quite costly.
With profitability in mind, credit card lenders use clever math to try and extract the highest amount possible.
This is how it works:
The first step in calculating your credit card bill is to convert your annual APR to a daily APR. You simply divide the annual rate by 365. Using the current US average interest rate of 16.86% – for accounts assessed interest – we come up with 0.046% (0.1686 / 365).
Next, you need to figure out your average daily balance. While this gets a little tricky when many purchases are involved, the simplest approach is to sum all of your debit entries and divide the total by the number of days in your billing cycle.
Assuming an average daily balance of $1,000, we can calculate our daily balance owed by multiplying the daily periodic APR by the average daily balance. Using the APR we calculated above, this works out to $0.46 (0.00046 * 1000).
The last step is to calculate the total amount owed. If we assume a 30-day billing cycle, our total interest payment works out to $13.86 (0.46 * 30).
Here is a great payoff calculator.
https://www.debt.com/tools-tips/calculators/credit-card-payoff-calculator/
While credit card companies determine your APR by assessing your overall creditworthiness, we have a few tips to get you on the fast track to a lower interest rate.
While somewhat obvious, building a reliable credit history can make you more attractive in the eyes of lenders. The first step is to raise your FICO score to at least 670. As well, when using existing cards, try and keep monthly purchases to less than 30% of your balance limit.
With so much competition in the lending space, institutions often make interest rate concessions to attract new clients. While some lenders may reject your application, others often go out of their way to provide unique offers to secure your business.
Often overlooked as way to lower your credit card APR, simply asking politely can often move the needle. If you have an existing relationship with an institution and are known as a long-term and loyal customer, they’ll often work with you to avoid losing your business. When calling, simply explain your circumstances and ask what they can do. Moreover, if you have readily available offers from other institutions, they’re more likely to accommodate your request.
With accuracy in mind, we went directly to the source. Analyzing the latest SEC filings from the largest credit card issuing institutions within the United Sates, we first presented how each is positioned on its balance sheet. Next – using data from each institutions official website – we broke down average credit card statistics by institution, type, introductory APR and penalty APR. Last, we provided a template for how credit card bills are calculated and provided tips for how to lower your credit card APR.
Moving in lock-step with the Federal Reserve’s benchmark interest rate, average credit card APRs have continued to rise over the last four years. As large US institutions look to increase their credit card exposure, borrowers have been more than willing to play the counterparty.
Reaching an all-time high of 799 billion in 2018, total American credit card debt has surpassed levels only seen leading up to the 2008 financial crisis. And as total debt continues to rise, average credit card APRs are rising right along with it.
When trying to extrapolate future trends, the Federal Reserve’s ‘wait-and-see’ approach to interest rate increases may allow current APR figures to hold up a while longer. However, if you want to get a sense of what’s moving the needle, pay attention to rhetoric from Federal Reserve officials as well as what traders are pricing in within the Treasury bond market.
Federal Reserve Consumer Credit Report (March 7, 2019)
9 Largest American Credit Card Issuing Institutions:
Citigroup Inc. 2018 Annual Report
JP Morgan Chase & Co. 2018 Annual Report
Capital One Financial Corp. 2018 Annual Report
Bank of America Corp. 2018 Annual Report
Synchrony Financial 2018 Annual Report
American Express Company 2018 Annual Report
Discover Financial Services 2018 Annual Report
Wells Fargo & Co. 2018 Annual Report
U.S. Bancorp 2018 Annual Report
Average Credit Card APR by US Institution, Type, Introductory APR Period and Penalty APR:
Citigroup Inc. Credit Card Interest Rates
JP Morgan Chase & Co. Credit Card Interest Rates
Capital One Financial Corp. Credit Card Interest Rates
Bank of America Credit Card Interest Rates and Business Credit Card Interest Rates
Synchrony Financial Credit Card Interest Rates
American Express Company Credit Card Interest Rates and Business Credit Card Interest Rates
Discover Financial Services Credit Card Interest Rates
Wells Fargo & Co. Credit Card Interest Rates and Business Credit Card Interest Rates
US Bancorp Credit Card Interest Rates and Business Credit Card Interest Rates
How to Calculate Your Credit Card Bill:
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