0% balance transfer offers are dwindling, and offer lengths are shrinking
The average credit card interest rate is 20.21%, according to data collected by The Balance in July 2020.
That’s down a hair from June’s average rate of 20.22%, but not because of any major card APR shifts. The Balance refined database calculations in July, and recorded just a few small card APR increases, but those offer changes were not significant enough to move the average rate needle drastically.
In July 2020 we updated our data collection and analysis to better reflect how and where consumers use their credit cards. These changes are reflected in the monthly change chart above, and the average card interest rate table below. Rates published prior to August 2020 may not reflect these changes.
Overall, interest rates are pretty stable right now, a stark contrast to falling rates in the spring after the Federal Reserve made emergency rate cuts in March as the pandemic flipped the U.S. economy upside down. Credit card issuers are still grappling with the financial and economic impacts of the coronavirus, and to avoid taking on more consumer debt balances right now, banks are dialing back balance transfer promotional offers for new cardholders.
- The average APR on credit card purchases is 20.21%, down 1.03 percentage points since January
- Store credit cards have the highest average interest rate.
- Business credit cards have the lowest average interest rate.
- Student credit cards have the lowest average interest rate among consumer cards.
Average Credit Card Interest Rates (APR) on Purchases by Card Category
Card type is just one factor that determines a credit card interest rate. To learn how The Balance categorizes cards based on type for this report, check out the methodology at the bottom of this page. Other deciding factors include your credit standing and the type of transaction you use the card for (more on that later in the “Average Interest Rates by Credit Card Transaction Type” section).
|Average Credit Card Interest Rates Based on Card Type|
|Current Average APR||Last Month||6 Months Ago|
|All Credit Cards||20.21%||20.22%||21.24%|
|Business Credit Cards||17.93%||17.93%||19.10%|
|Student Credit Cards||18.78%||18.78%||20.61%|
|Cash-Back Credit Cards||19.12%||19.07%||20.23%|
|Travel Rewards Credit Cards||19.21%||19.21%||20.47%|
|Secured Credit Cards||20.14%||20.14%||21.22%|
|Store Credit Cards||24.17%||24.28%||25.39%|
A credit card issuer often has a range of APRs it might charge on a certain card, such as 14.99% to 24.99%. The better your credit score, the more likely you are to get approved for an interest rate on the lower end of the range, and vice versa.
What Has Happened: More Issuers Amend Balance Transfer Deals
Since its last action on March 15, the Federal Reserve has abstained from additional federal funds rate changes. The fed funds rate is now resting at a 0%-0.25% range, and that will likely be the case until the economy and employment have rebounded from the pandemic. Card issuers spent a few months making interest rate reductions, but it’s now been more than two months since The Balance has recorded an APR decrease based on Fed actions.
We have seen a few issuers adjust a handful of purchase APRs for new cardholders, including these specific card offers in July:
- Merrick Bank Double Your Line Visa Credit Card: Low end of variable APR range was increased by 2% (was 17.45%-27.70%, is now 19.45%-27.70%)
- Best Western Rewards Mastercard: Variable APR range increased by 0.25 percentage points (was 16.74%-22.74%, is now 16.99%-22.99%)
- Best Western Rewards Premium Mastercard: Variable APR range increased by 0.25 percentage points (was 18.74%- 22.74%, is now 18.99%-22.99%)
However, the most notable interest rate changes continue to be among promotional balance transfer offers.
0% Balance Transfer APR Offers Are Shrinking
Introductory rate offers typically ebb and flow, but recent cutbacks have stood out. In March there were 95 cards in our database advertising promotional balance transfer rate offers for new cardholders, and today there are 78.
Fewer cards are offering balance transfer APR deals that last 15 months or longer these days, too. Most recently, Bank of America decreased the 0% balance transfer APR offer lengths on two of it’s cards—Bank of America Cash Rewards Credit Card and Bank of America Cash Rewards for Students—from 15 months to 12.
The Discover it Balance Transfer card offer, which once boasted an 18-month-long 0% balance transfer APR for new cardholders, was also pulled down in July. In addition, we noticed U.S. Bank removed mentions of promotional balance transfer offers from business card marketing materials, although the offers are still in the card terms and conditions. The Balance saw this happen with another U.S. Bank card earlier this year, and in that case, the offer was later cut entirely, so this may be a signal of more changes to come.
This card offer trend is largely driven by the pandemic and how lenders are (and are not) extending new lines of credit right now. Banks are wary of taking on extra financial risk in the form of large consumer debt balances that may not be repaid. For the balance transfer offers that are available, consumers may find it harder to qualify, too.
“Credit card balance transfer offers often require excellent or good credit for consumers to acquire them. The pandemic has made this more challenging as many struggle with their finances,” said John Cabell, director of banking and payments intelligence for J.D. Power, a market research company. “As a result, card issuers have reduced their balance transfer offerings. They are monitoring consumer debt eligibility even more carefully during this economic downturn.”
American Express is a good example of this. After cutting promotional balance transfer deals from several cards in June, the issuer also removed the transfer option for current cardholders. It’s still not available.
“We are not currently offering balance transfers across all our card products,” according to an American Express spokesperson statement emailed to The Balance after the change. “From time to time, we make adjustments to our offerings to ensure we’re managing risk for our customers and the company in a responsible way.”
There are several cards that cut balance transfer rate offers months ago that have not re-added them, either, such as the Capital One Quicksilver Cash Rewards Card and the U.S. Bank Visa Platinum Card. The Chase Slate card, which was known for its generous balance transfer offer, is also still not open for new online applications.
“I think [banks] may be anticipating higher default rates and preparing for people who are seeking credit help while unemployed,” said Graciela Aponte-Diaz, director of federal campaigns for the Center for Responsible Lending. “They are being super cautious about what is coming.” Data on second quarter credit card delinquency rates are expected later this summer.
Meanwhile, Consumers Are Managing Card Debt
Consumers are still collectively carrying a huge amount of card debt, but the figure is way down from where it was just a few months ago.
The U.S. revolving debt balance (which refers primarily to credit card balances) has dropped to $992.36 billion, according to the latest G.19 consumer credit report. That's a 9.7% drop of more than $106 billion from the record high balance of $1.099 trillion in February. It's now the lowest it's been since August 2017.
The latest consumer credit report marks the fourth consecutive month of lower revolving debt balances. The sharp declines are likely due to a steep drop in consumer spending as the coronavirus pandemic quickly changed how people were working and using money around the U.S. The newest consumer spending figures show people started to spend a bit more as some stay-at-home restrictions lifted around the U.S, but debit cards have since been used more often than credit cards, according to new Visa payment statistics.
Average Interest Rates by Credit Card Transaction Type
There are three main transaction types credit cards commonly offer: purchases, balance transfers, and cash advances. APRs often vary depending on which of those transactions you make, and some issuers give new cardholders a break by offering low or 0% interest rates on some of those transactions for a limited time.
Purchase APR Deals
If you want to finance a large purchase with a new credit card, finding a card that offers a promotional purchase APR (such as 0% for 15 months) can help with that. For the third consecutive month, roughly one-quarter (25%) of the cards we track for this report are offering new cardholders introductory purchase APRs.
- On average, these offers last about 12 months, which has been the case since October 2019.
- The longest introductory purchase rate offer is 20 months, which is offered by two cards in our database: U.S. Bank Visa Platinum Card and U.S. Bank Business Platinum Card.
- Cards with promotional purchase APRs charge an average ongoing rate of 18.26%.
Balance Transfer APR Deals
Moving debt from a high-APR credit card to one with a lower or limited-time 0% APR on balance transfers can reduce interest costs and help you pay down debt faster. As mentioned earlier, there are fewer promotional balance transfer rates available right now, and some offers are shorter than they once were.
- The average length of these balance transfer rate promotions is about 14 months, which is consistent with prior month averages despite recent offer changes.
- The longest offer overall is touted by the SunTrust Prime Rewards Credit Card, which gives you 36 months to pay off transferred debt at a reduced interest rate of 3.25%.
- The best 0% balance transfer APR deal is 20 months long, offered by the U.S. Bank Business Platinum Card. The longest 0% offer on a consumer card is 18 months, as advertised by the HSBC Gold Mastercard, Citi Simplicity, Citi Diamond Preferred, Citi Double Cash Card, and the Wells Fargo Platinum Card.
- When promotional rate offers end, we found the average APR of balance transfer transactions is 18.08%.
Cash Advance Rates
Most cards allow you to tap your credit line by using the card to withdraw cash at an ATM, but that convenient feature will cost you. About 89% of the cards we track allow cash advances.
- The average APR on cash advances is currently 25.36%, nearly unchanged since April.
- The highest cash advance APR we found is still 36%. That steep cash advance APR is charged by both the Fortiva Credit Card and First PREMIER Bank Gold Mastercard.
On top of steep APRs, cash advance transactions usually come with extra fees and start accruing interest immediately, so avoid making them as much as possible, especially if you are trying to minimize extra costs during this uncertain time.
Penalty Interest Rates
If you fall seriously behind on your monthly credit card payments, exceed your credit limit, or if your bank returns a monthly payment, your standard purchase APR may be raised to the penalty interest rate. The penalty rate (also called the default rate) is the highest interest rate card issuers charge.
While not all credit cards charge penalty rates, many do, including 105 of the cards surveyed for this report (about 33%). The average penalty APR in our card sample is a steep 28.84%, nearly unchanged since May. That’s 8.63 percentage points higher than the average purchase APR.
The Balance found that despite rate cuts made earlier this year, penalty rates may be as high as 30.90%. That monstrous rate is charged by five Capital One business cards: Capital One Spark Cash for Business, Capital One Spark Classic for Business, Capital One Spark Miles for Business, Capital One Spark Cash Select for Business, and Capital One Spark Miles Select for Business. The highest consumer card penalty rate is 30.74%, as charged by the BMW Credit Card.
Pay your bill on time every month and you won’t have to worry about a high-cost penalty interest rate. If you can’t afford to make a payment right now, check with your card issuer to see what financial hardship options are available to protect your credit card APR and your credit score.
Average APR Based on Recommended Credit Score
If you have less than perfect credit, chances are your card probably has above-average interest rate. Based on the card offer data collected by The Balance, credit cards marketed to those with bad/fair credit scores (below 670, according to FICO) have an average purchase APR of 25.20%, 5.93 percentage points above the average APR of cards marketed to those with good/excellent credit (19.27%).
A good credit score indicates to lenders that you can manage credit cards, loans, or debt repayment. Conversely, cards that accept applicants with lower credit scores charge higher interest rates to make up for the risk of default.
The type of credit score you see marketed on a card offer page (or in one of our reviews) is a recommendation. It’s a good benchmark, but your credit score is only one of many things credit card issuers consider when deciding whether or not to approve a card application.
What Average Credit Card APRs Mean For You
We know there are many other things grabbing your attention these days, but credit card interest rates are still important numbers to watch, especially if you carry a balance on your card month-to-month. This is not a time to brush off numbers that can quickly add dollars to your credit card bill.
“COVID-19 is directly impacting consumers' ability to pay even the most basic bills right now and credit card debt can’t be ignored,” said Jeff Arevalo, an expert with GreenPath Financial Wellness, a nonprofit credit counseling agency. “For people utilizing credit more and having problems making payments or meeting the minimum payments on credit cards, a high balance and accruing interest makes it more difficult to get out of debt.”
Right now, focus on managing the accounts and balances you may already have. Interest rates won’t likely go down anytime soon, and a generous 0% balance transfer deal may not be as easy to come by to help relieve interest cost burdens.
“Consumers still have other options to reduce credit card debt if workable balance transfers are too challenging to find,” said Cabell. “Personal loans have become more popular in recent years, and these are often designed to accommodate typical credit card debt levels and offer lower interest rates. In instances where consumers experience hardship, cardholders may be able to negotiate a lower interest rate with their card issuer.”
The Balance found many card issuers are still offering a variety of relief options for those with financial difficulties, including payment deferrals and waived fees with no negative impact on your interest rate or credit report. However, be mindful that even if you aren’t making card payments right now, those accounts may still be accruing interest, and annual fees may still apply.
This monthly report is based on credit card offer data collected and monitored on a rolling basis by The Balance for 314 U.S. credit cards in July 2020. Our data pool includes offers from 43 issuers, including the largest national banks. We track average interest rates on both a weekly and monthly basis for each card category, plus the overall average rate for all cards.
How We Calculate APR Averages
We gather purchase and transaction APR information from current credit card terms and conditions. If a credit card APR is posted as a range, we first determine the average of that range, then use that number in our overall average rate calculations, so the statistics are true averages, not skewed toward the low or high end of a spectrum.
The overall average APR in this report is an average of the average APR in each category we track: travel, cash back, secured, business, student, and store cards.
How We Calculate Average Rates vs. the Fed
We look at interest rates by card category and transaction type to give a clearer view of the interest rate you can expect to pay based on the kind of card you're using or how you plan to use it. By comparison, the latest data from the Federal Reserve puts the average credit card APR at 14.52%. However, the Fed calculates its rate based on voluntary reporting from 50 credit-card-issuing banks, and it's unclear what goes into those averages or what types of cards make up those averages.
The Fed also reports an average rate on accounts charged interest (meaning those that carry balances month-to-month), though its calculation gives more weight to accounts with high balances. In the second quarter of 2020, the average interest rate on credit cards accruing finance charges was 15.78%, down from a record high 17.14% reported in the second quarter of 2019.
How We Categorize Cards
We assign a category to each credit card in our database, and a card can go in only one category. Here's how we define them:
- Business credit cards: Cards small business owners can apply for and use to make purchases for their companies.
- Cash-back credit cards: Cards that offer you a little rebate on most purchases you make with the card.
- Travel rewards credit cards: Cards that allow you to earn extra points or miles on travel purchases, either with specific travel brands or on a variety of travel-related expenses. Cards that offer high-value travel redemption options are also part of this group.
- Student credit cards: Cards for college or graduate students who are at least 18 years old.
- Secured credit cards: Cards that require a security deposit that’s usually the same amount as the credit limit you’ll be given. These cards are aimed at helping people with poor credit or no credit history to build credit.
- Store credit cards: Cards you can use at particular retail stores, and sometimes other places as well. They often offer discounts or rewards for purchases made at the associated store (or chain of stores).
- Other: Cards that do not fit any of the following categories: business, cash back, student, travel, secured, and store. This includes cards that offer very few—if any—features.
Board of Governors of the Federal Reserve System. "July 29, 2020: Federal Reserve issues FOMC statement." Aug. 4, 2020.
Board of Governors of the Federal Reserve System. "Open Market Operations." Accessed Aug. 4, 2020.
Federal Reserve. "Consumer Credit Outstanding (Levels): Major Types of Credit." Accessed Aug. 7, 2020.
Federal Reserve. "Consumer Credit - G.19." Accessed Aug. 7, 2020.
Bureau of Economic Analysis. "Personal Income and Outlays: May 2020." Accessed Aug. 4, 2020.
TransUnion. "Managing Your Credit Through a Financial Hardship." Accessed Aug. 4, 2020.
Federal Reserve. "Consumer Credit - G.19: About." Accessed Aug. 4, 2020.