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Average Credit Card Rates Poised to Set to Hit Stratosphere if Feds Crank Interest Rates Up

Average credit card rates currently charged by issuers of Visa, Mastercard, Discover, and American Express are now at the highest level since 2001 and the spread between the prime rate and credit card interest rates is the highest point since 2011. If the Feds decide to raise short-term interest rates by 75 basis points (bps), the current credit card annual percentage interest rates (APRs) are poised to reap the highest spread over the prime rate since 1992.

Average Credit Card Rates

The current credit card APR charged by the Top 100 banks stands at 14.22%, compared to 12.89% for 2017 and 12.35% for 2016. Eighteen years ago average credit card APRs hit 14.89% and steady declined as the prime rate froze at 4.00% from 2008 to 2014, according to figures from the Federal Reserve and CardData.

Credit Card Rate Spread

In terms of the spread between average credit card rates and the prime rate, the current spread is 922 bps, compared 864 bps for 2017, and 860 bps for 2016. The highest recorded spread was in 1992 when the average credit APR was 18.22% and the prime rate was 6.00% for a spread of 1222 bps, according to analysis by RAM Research.

From the author’s personal experience the year 1992 was a watershed moment in the credit card world when Household Bank and General Motors teamed in September to launch the GM Mastercard, featuring the first variable interest of prime +10.4% or 16.4%. This compared to the fixed 19.80% credit card APRs charged by the top U.S. issuers. The move drove the credit card APR spread down from 1222 bps in 1992 to 727 bps in 1997.

Pivotal Historical Moments

In 1992, more than 90% of all Visa and Mastercards carried fixed interest rates. Today about 95% carry variable interest rates.

The GM Mastercard was similar to move by AT&T and Synovus when the AT&T Universal Bank Visa and Mastercard was launched in September 1990 offering the first no-annual-fee-for-life Visa and Mastercard. The new card product led to an explosion of no annual fee Visa and Mastercard cards across the credit card industry.

In 1990, despite the competition from the no annual Discover card, more than 90% of Visa and Mastercard carried annual fees. Today, the only cards with annual fees offer either an exceptional low APR, a ton of rewards or cash-back.

Current APR Situation

The year-on-year (YOY) growth rate of consumer revolving debt for January 2019 came in at 2.9%, compared to a revised 6.1% YOY change for the final three months of 2018, and a revised 3.1% YOY gain for all of 2018. The 2.9% YOY rate for January 2019, also compared to a revised 1.1% in December, and a revised 5.5% YOY change in November, according to CardTrak.

Average U.S. Credit Card Interest Rates

1985: 19.11%
1986: 18.84%
1987: 18.72%
1988: 18.66%
1989: 18.67%
1990: 18.74%
1991: 18.66%
1992: 18.22%
1993: 17.74%
1994: 17.09%
1995: 16.64%
1996: 15.82%
1997: 15.77%
1998: 15.71%
1999: 15.21%
2000: 15.71%
2001: 14.89%
2002: 13.43%
2003: 12.30%
2004: 12.72%
2005: 12.51%
2006: 13.21%
2007: 13.30%
2008: 12.08%
2009: 13.40%
2010: 13.78%
2011: 13.74%
2012: 12.06%
2013: 11.91%
2014: 11.87%
2015: 12.09%
2016: 12.35%
2017: 12.89%
2018: 14.22%

Additional Current & Historical Quarterly and Annual U.S. Credit Card APRs


U.S. Prime Rate

1985: 9.50% (6-18-85)
1986: 8.00% (7-11-86)
1987: 8.25% (5-15-87)
1988: 9.50% (7-14-88)
1989: 10.50% (7-31-89)
1990: 10.00% (1-8-90)
1991: 8.50% (5-1-91)
1992: 6.00% (7-2-92)
1993: 6.00% (7-2-92)
1994: 7.75% (8-16-94)
1995: 8.75% (7-7-95)
1996: 8.25% (1-31-96)
1997: 8.50% (3-26-97)
1998: 8.25% (9-30-98)
1999: 8.00% (8-25-99)
2000: 9.50% (5-17-00)
2001: 6.75% (6-28-01)
2002: 4.25% (11-7-02)
2003: 4.00% (6-27-03)
2004: 4.25% (6-30-04)
2005: 6.25% (6-30-05)
2006: 8.25% (6-29-06)
2007: 7.75% (9-18-07)
2008: 4.00% (10-29-08)
2009: 4.00%
2010: 4.00%
2011: 4.00%
2012: 4.00%
2013: 4.00%
2014: 4.00%
2015: 3.50% (12-17-15)
2016: 3.75% (12-15-16)
2017: 4.25% (6-15-17)
2018: 5.00% (6-14-17)

Additional Current & Historical Quarterly and Annual U.S. Prime Rate

Average U.S. Credit Card Interest Rates & Prime Rate Spreads

1985: 961 bps
1986: 1084 bps
1987: 1047 bps
1988: 916 bps
1989: 817 bps
1990: 874 bps
1991: 1016 bps
1992: 1222 bps
1993: 1174 bps
1994: 934 bps
1995: 785 bps
1996: 757 bps
1997: 727 bps
1998: 746 bps
1999: 721 bps
2000: 621 bps
2001: 814 bps
2002: 918 bps
2003: 830 bps
2004: 847 bps
2005: 626 bps
2006: 496 bps
2007: 555 bps
2008: 808 bps
2009: 940 bps
2010: 978 bps
2011: 974 bps
2012: 806 bps
2013: 791 bps
2014: 787 bps
2015: 859 bps
2016: 860 bps
2017: 864 bps
2018: 922 bps

Additional Current & Historical Quarterly and Annual U.S. Credit Card Spreads

Source: JPMorgan Chase; Federal Reserve: RAM Research; Robert McKinley; CardData; Visa; Mastercard; American Express; Discover; CardTrak; CardFlash;