Credit Card Interest Rates Hit All-Time High

Even as the Fed cuts interest rates, and signals that more rate cuts on the way, consumer credit card interest rates are hitting all-time highs. A Bankrate report said that the average retail credit card interest rate reached a whopping 30.45 percent earlier this year, up from 2021’s average of 14.35 percent. 

This month, Beyond retail credit cards, the average overall credit card rate is sitting about 21 percent. Of course, since those are merely averages, many credit card rates are much higher.

Trump proposed capping credit card interest at 10%, which is just a form of price control by a different name. Just as the free market should be setting the cost of borrowing for banks, the free market should also be setting interest rates for consumers — not federal dictates. In fact, federal dictates only make the problem worse, since banks are going to respond to these caps and other imposed limits by making up the revenue in other ways. 

For example, a proposed cap on credit card fees from the CFPB was partially to blame for banks coming up with different fees to charge instead, along with higher overall interest rates on their credit card products — and now here we are, looking at record-high rates for consumers. To make matters worse, the average balance is over $6,000, with some consumers racking up a mind-numbing $10k or more in personal debt.

While reports are coming out now about how the rise in consumer debt has slowed, it’s all relative. From 2023 to 2024, consumers increased their credit card debt by $111 billion. That doesn’t even include other types of household debt, which collectively grew by $733 billion in the same period. Meanwhile, credit card delinquencies last year reached their highest point in a decade, with 9.1% of balances becoming delinquent in the last year.

Household Debt and Credit Report – New York Fed (Q2 2024)

If a consumer can’t afford to buy things without racking up $6,000 in credit card debt, you can bet that they also can’t afford to pay 30% interest on that same balance. Deeper and deeper into a black hole of consumer debt they go, increasingly unable to pay for anything unexpected, just one small emergency expense away from bankruptcy — or homelessness.

Consumers will keep resorting to their credit cards as basic goods continue getting more expensive; a guaranteed outcome with the Fed cutting interest rates to save the quivering, low rate-addicted system while inflation is still nowhere near under control. The things consumers need most like food, gas, housing, and transportation will become even less affordable once the effects of the Fed’s rate cuts gel into the broader economy. The Fed had no choice but to cut rates after inflating the economy out of several crises, but it can’t keep doing so forever. As Peter Schiff said on The Lead-Lag Report earlier this month:

“Inflation is the problem, and there’s no solution to that problem…as long as people still have confidence in the dollar, yes, the Fed can balance out of everything, because they can print dollars and buy whatever’s going down. It’s that eventually, no one wants those dollars, and then, you know, the game’s over.”