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Credit Card Interest Rates Just Hit a New All-Time High

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  • The interest rates charged on credit cards are at record highs as we enter the holiday shopping season.
  • The stakes for consumers are high as the next decision on whether to raise rates by the Fed further approaches. 
  • Americans spent $105 billion on credit card interest in 2022 alone. 
credit card interest rates - Credit Card Interest Rates Just Hit a New All-Time High

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Bankrate’s annual survey has found that the interest rates charged on credit cards in the U.S. are now at record highs, leading to increased debt servicing charges for consumers.

The revelation of record interest rate charges on credit cards comes days before the U.S. Federal Reserve’s next decision on whether to raise interest rates further to help lower stubbornly high inflation, raising the stakes for Americans heading into the year-end holiday shopping season.

Record High Credit Card Interest Rates

The latest data from Bankrate has found that the average retail credit card in the United States charges a record-high interest rate of 28.93%. That’s up from an interest rate of 26.72% in 2022 and 24.35% in 2021. However, some retail credit cards used by consumers now charge more than 30% interest, with several in-store credit cards charging interest rates as high as 33%.

Bankrate is warning consumers as we enter the busy holiday shopping season to be mindful of the interest rates charged on their credit cards, as well as to be careful when it comes to seasonal promotions from credit card issuers, stressing that consumers may incur unexpected interest and other charges if they fail to pay their balance in full before any promotional period ends.

Higher From Here

The good news for consumers is that the U.S. Federal Reserve is not expected to raise its key interest rate at its next policy meeting on Nov. 1. The central bank is widely expected to leave its trendsetting Fed Funds Rate at its current level of 5.25% to 5.50%, which is a 22-year high. Futures traders are betting that there’s only a 24% chance that the Fed will raise interest rates at its last meeting of the year on Dec. 13.

However, some analysts expect that credit card interest rates will continue rising whether or not the central bank continues lifting interest rates to bring inflation back down to its 2% annualized target. With consumer spending remaining strong, there’s little motivation for credit card issuers to lower interest rates to both attract new clients and incentivize current customers to use their cards, say analysts.

The fact that the U.S. Federal Reserve is keeping interest rates elevated also gives credit card companies the impetus to keep the rates they charge customers high as well, especially during the year-end holiday shopping season, which is an especially lucrative time for credit card issuers.

What’s Next

While the Fed may not take interest rates higher, the expectation is that the central bank will hold rates at current levels for many months to bring inflation lower. Regardless, the interest rates charged on credit cards can be expected to continue creeping upward as lenders look to capitalize on both the current high interest rate environment and the seasonal shopping season.

To protect themselves, American consumers should look for credit cards that charge below-average interest rates, limit the use of credit cards, and pay their balances off in full each month.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2023/10/credit-card-interest-rates-just-hit-a-new-all-time-high/.

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