Average interest rates for bank-issued credit cards this past November surpassed a record set in 1985, Axios reported Wednesday, citing data from the Federal Reserve.
The previous record rate was 18.9%, set in the first quarter of 1985, with November’s rate of 19.1% comfortably eclipsing it, according to Axios. Credit card interest rates climbed alongside the Federal Reserve’s federal funds rate, which the Fed hiked a historically aggressive pace in 2022 to blunt economic demand and reduce the impact of inflation, NPR reported.
“You don’t notice it so much on the monthly statement,” senior industry analyst Ted Rossman of consumer financial services firm Bankrate told NPR. “Your minimum payment might change by only a few bucks a month. But the problem is, when you drag it out for a decade and a half plus, that’s where you really feel it.”
This illustration picture shows debit and credit cards arranged on a desk on April 6, 2020 in Arlington, Virginia.(Photo by OLIVIER DOULIERY/AFP via Getty Images)
Americans have increasingly been relying on credit cards as inflation continues to outpace wage growth, in contrast to the early days of the pandemic when many used government stimulus to pay off debt, NPR reported. Through the third quarter of 2022, the average American carried $5,474 of credit card debt, a nearly 13% increase compared to the same time in 2022, according to credit reporting agency TransUnion.
Despite the elevated rates, credit card delinquency remained low through the third quarter of 2022 compared to historical data from the past 20 years, according to the Federal Reserve. However, more Americans are at risk of delinquency, 35% of U.S. adults held credit card debt month-over-month as of December 2022 up from 29% at the same time last year, according to Bankrate.
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