Credit Card Interest Rates Hit Record High

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Credit card interest rates have reached new highs over the last few months. Credit card borrowers are paying more interest than they have in at least thirty years.

If you’re carrying a large credit card balance, you’re probably feeling the pinch of higher credit card interest rates. Credit card interest rates have increased aggressively over the last few years as the Fed has fought to get inflation under control.

Check out the chart below, which is from the Federal Reserve.

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Credit card interest rates are as high as they’ve been for the last thirty years.

As you can see, credit card interest rates are as high as they’ve been for the last thirty years. That means minimum payments have also increased, which is making it more difficult for many borrowers to pay off their credit card debt.

How Credit Card Minimum Payments Are Calculated

Credit card minimum payments vary depending on whether you have a large balance or a very small balance. Generally-speaking, here’s how credit card lenders calculate minimum payments:

  1. If you have a large balance – If you owe a large balance ($1,000 or more), then your minimum payment is likely around 2% of the balance. That’s enough to cover the interest and pay a small amount toward the principal.
  2. If you have a small balance – If your balance is relatively small (less than $1,000), then your minimum payment will probably be between $25 to $75, but never more than the actual balance itself.

Keep in mind that these are just general rules-of-thumb. Credit card lenders always want you to pay at least the interest, so if credit card interest rates increase, minimum payments may increase as well.

Minimum payments can be helpful if you have a month where expenses are tight. You can simply pay the minimum payment to stay in good standing, but you don’t want to make a habit of it. Again, minimum payments pay the interest and just a little more. If you pay just minimum payments, it could take ten to twenty years to repay your credit card balance – assuming you don’t increase the balance by charging even more.

How to Eliminate Your Credit Card Debt

Again, minimum payments largely get you nowhere when it comes to paying off your credit card debt. If you make just minimum payments, it could take ten or twenty years to pay off your debt. And with credit interest rates rising to record highs, it’s even tougher to pay off credit cards than just a few years ago.

Here are a few ways you can potentially eliminate your credit card debt:

  1. Make double or triple payments – Minimum payments cover just the interest and a tiny bit of principal. To make headway on your debt, you need to double or triple up on your payments. If you have multiple credit cards, focus on the cards with the smallest balances first. As you pay off cards, “snowball” the monthly savings into doubling or tripling your payments on the remaining credit card balances.
  2. Debt consolidation personal loan – The interest rates on these types of loans can often be cheaper than credit card interest rates. The rates are typically fixed as well and a good portion of the payment goes toward the principal. You may want to check into a personal loan to consolidate your debt into one monthly payment so you can pay off your debt faster.
  3. Debt consolidation HELOC – A home equity line of credit, or HELOC, can be a good way to consolidate debt into a lower monthly payment. Having said that, keep in mind that HELOCs usually come with interest-only payments. You’ll need to make extra payments to actually pay the balance down. HELOC rates are usually much lower than credit card interest rates, which will make it easier to pay off your debt faster.
  4. Home equity agreement (HEA) – A home equity agreement is a great way to tap into home equity without a monthly payment or interest charges, even if your credit is less than perfect. You can find more information about the home equity agreement here.
  5. Debt settlement – If you have a lot of debt and are struggling to pay it off, you may want to consider debt settlement. Debt settlement companies negotiate your balances down so you can get out of debt faster. Keep in mind that these types of programs will wreck your credit for a few years, so do this only if you are genuinely struggling to pay off your debt. You may also need to pay income taxes on the forgiven debt.
  6. Bankruptcy – This is a viable option, but should only be used as a last resort. Bankruptcy can eliminate your debt relatively quickly, but it’s a difficult process and it will damage your credit for years to come.

When Will Credit Card Interest Rates Go Down?

So, what does 2024 hold for credit card interest rates? Will they drop soon? Honestly, it’s anybody’s guess. If inflation remains high, the Fed will keep interest rates high as well.

If the economy dips into recession and unemployment rises, the Fed may begin cutting interest rates, which could cause credit card interest rates to fall as well.

Rates will likely go down at some point, but there’s no way to predict when that will happen with any certainty.

Frequently Asked Questions

Why are credit card interest rates so high?

Credit card rates tend to be higher than rates for other types of loans because credit cards are an unsecured form of debt, meaning they have no collateral to secure the money you borrow. Credit card interest rates are currently the highest they’ve been in at least the last thirty years because the Fed has increased interest rates to fight inflation.

What are current credit card interest rates?

Credit card interest rates are currently the highest they’ve been in at least the last thirty years because the Fed has increased interest rates to fight inflation. As of January 2024, the average credit card interest rate is 21.19%, according to the Federal Reserve.

When will credit card interest rates go down?

Credit card interest rates are currently the highest they’ve been in at least the last thirty years because the Fed has increased interest rates to fight inflation. Once the Fed believes inflation is under control, they’ll start cutting rates, which should cause credit card rates to go down.

Mike Roberts
About Mike Roberts

Mike Roberts is the founder of, a published author, and a highly experienced veteran of the mortgage industry. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.

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