A new report shows that credit card interest rates have reached a high of nearly 21%, making it harder to borrow money.
Financial website WalletHub published the findings Friday as part of its Credit Card Landscape Report.
“At 20.92%, the average credit card interest rate is higher than it has been at any point since the Federal Reserve started tracking this information in 1994,” said WalletHub.
According to its report, the average interest rate for new credit card offers was 22.15% in the first quarter of this year, up from 18.32% in the first quarter of 2022. Interest rates on business credit cards spiked the most, rising nearly 25% year-over-year. Additionally, initial perks have decreased.
“Understanding the credit card climate is important for two reasons,” the site explained. “First, credit card offers change regularly, based on the health of the economy and issuers’ business objectives. So being able to see the bigger picture – averages, trends, etc. – gives you a baseline against which to compare offers. And that will help you find the best credit card deals as well as ultimately save more money.”
Credit card rates respond to the Federal Reserve Bank’s interest rate moves. From March 2022 to last month, the Fed raised interest rates nine times in an effort to tame inflation, per Forbes Advisor. However, inflation – ballooning prices for common goods and services – increased by 0.4% in February.
“Inflation remains too high, and the labor market continues to be very tight,” said Fed Chair Jerome Powell in March, when the bank raised interest rates despite the failures of prominent banks. “My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal.”
WalletHub said initial awards also “dried up” during the Great Recession in 2008. Leading up to the Great Recession, the Fed went on a rate hike spree. To compile its recent report, WalletHub used information collected “from the websites of each institution which we then use to update our internal database of 1,500+ credit cards.”