Credit card interest rates are expected to average 20.5% by the end of the year.
That would be up from the 19.6% recorded during the last week of 2022 and would be the highest average that Bankrate has seen in 40 years, Bankrate Chief Financial Analyst Greg McBride told Bloomberg in an interview published Thursday (Jan. 5).
Many store credit cards already have rates higher than that as they averaged 26.72% last year, and some individual cards have exceeded 30%, according to the report.
These increases have been driven by the Federal Reserve’s raising of interest rates as part of its efforts to slow inflation.
At the same time, credit card delinquencies remain low because consumers have saved cash and have benefited from a strong job market, the report said.
Even if the economy were to contract and the job market go south, credit card rates are likely to remain high because consumers will keep up with their credit card payments as long as they can, according to the report.
Consumers also plan to apply for more credit cards, even in a time of record credit card debt, the Federal Reserve Bank of New York’s Center for Microeconomic Data reported in November.
The organization said its Credit Access Survey released Nov. 21 found that the application rates remain below pre-pandemic levels for those with credit scores below 680 but are higher for those with scores over 760.
“The strength in credit card demand and access coincided with the record growth in credit card balances over the past year,” the organization said at the time.
PYMNTS’ research has found that consumers’ debt load has accumulated in recent weeks, particularly for consumers who live paycheck to paycheck. The most recent holiday shopping data shows that 45% of paycheck-to-paycheck consumers leaned heavily on credit and financing to get Black Friday deals, paying for nearly 60% of their purchases in these ways.
With the average interest rate charged on credit card debt reaching an all-time high in the wake of interest rate hikes, the debt load is becoming more expensive.