WalletHub recently analyzed newly released Federal Reserve data on credit card interest rates and debt and released a new survey showcasing consumer sentiment about record-high rates and rising debt.

Key Takeaways

  • Record-High Interest Rate: At 22.77%, the average credit card interest rate for existing accounts is higher than it has been in the past 30 years. Record-high rates are costing consumers more than $163 billion on an annual basis.
  • Increase in Debt, But Not a Record: The $1.23 trillion in credit card debt that we’ve racked up as of August 2023 is 10% lower than the record for the month but still 7% higher than last year, after adjusting for inflation.

Credit Card Interest & Debt Survey

  • Mind-boggling Interest Rate Reality: 56% of Americans describe the current average interest rate as “crazy high.”
  • Far From Reasonable: Nearly 1 in 2 people say 10% is the maximum interest rate they would consider reasonable for a credit card.
  • Silver Lining: Nearly 3 in 5 people say record-high credit card interest rates push them into paying off debt.
  • Interest Rate Emotions: 35% of people feel frustrated due to record-high credit card interest rates, while 30% feel overwhelmed, and 12% feel angry.
  • Support for a Federal Rate Cap: 86% of Americans say the government should put a cap on how high credit card interest rates can get.
  • Extreme Sacrifices: 52% of Americans would give up sweets for a year to avoid paying interest on credit cards, while 32% would move to a different country and 20% would move in with their in-laws.
  • Tipping Annoyance: 35% of Americans feel annoyed about tipping, considering record credit card interest rates and debt.

Expert Commentary

Are credit card interest rates at record levels?

“Credit card interest rates are higher now than at any other point since the Federal Reserve started tracking interest rates in 1994. The average interest rate on new credit card offers has gone up by more than 12% in the past year alone, forced higher by Fed rate hikes in support of the fight against inflation,” said Odysseas Papadimitriou, WalletHub CEO. “Fortunately, the Fed is expected to start cutting its target rate next year, which should provide some interest-rate relief for people with credit card debt.”

How will record-high credit card interest rates affect consumers?

“Record-high credit card interest rates are costing consumers more than $163 billion on an annual basis. We collectively owe more than $1 trillion to credit card companies, and the combination of near-record debt and record interest rates is not something most people can afford,” Papadimitriou said. “The silver lining is that nearly 3 in 5 people say record interest rates are pushing them to pay off credit card debt, according to a new WalletHub survey.”

How do consumers feel about credit card interest rates right now?

“A new WalletHub survey shows that 35% of people feel frustrated due to record-high credit card interest rates, while 30% feel overwhelmed and 12% feel angry. None of those emotions bode well for our mental or even physical health, which may help explain why 56% of Americans describe credit card rates as ‘crazy high’ right now,” Papadimitriou said.  “The impact of high rates, high debt levels, and prolonged inflation is even affecting how we perceive everyday financial decisions such as whether to leave a tip. WalletHub’s survey found that 35% of Americans feel annoyed about tipping, considering record credit card interest rates and debt.”

How do consumers want to deal with record interest rates?

“According to a new WalletHub survey, 86% of Americans say the government should put a cap on how high credit card interest rates can get. What kind of cap are we talking about? Well, nearly 1 in 2 people say 10% is the maximum interest rate they would consider reasonable for a credit card. If government intervention doesn’t work, 52% of Americans would give up sweets for a year to avoid paying interest on credit cards, while 32% would move to a different country and 20% would move in with their in-laws,” Papadimitriou said.

4 Tips for Minimizing the Effects of Record Interest Rates

  1. Designate at least one credit card for everyday purchases and pay the bill in full every month. When you pay your full statement balance by the due date every month, interest charges will not accrue, so the card’s interest rate won’t matter. On the other hand, if you use the same card for everyday purchases and longer-term debt, interest will apply to everything.
  2. Get a balance transfer card to reduce the cost of existing debt. The best balance transfer credit cards offer up to 21 months without interest, and good offers are available to people with fair credit or better. A long 0% introductory period can save you hundreds of dollars on interest and help you get out of debt much sooner.
  3. Use a 0% credit card for big-ticket purchases. If you have a major expense that will take months to pay off, using a 0% credit card can help you avoid interest charges on that expense as well as on your everyday purchases, since you won’t have to mix them with the revolving debt.
  4. Budget, save, and build credit. Cutting back on luxury expenses will leave you with less debt for high rates to apply to. Saving more and improving your credit score will put you in the best possible position to qualify for 0% cards and then take advantage of lower interest rates generally when the economy improves.

Full Survey: 2023’s Credit Card Interest Rates and Debt Survey

Source: WalletHub