In 2024, credit card interest rates are on the rise, despite rate cuts from the Federal Reserve. This trend is concerning for borrowers, especially those carrying debt.
Increase in Credit Card APR
According to LendingTree, the average annual percentage rate (APR) jumped again in June for the third consecutive month, reaching its highest level since last year. Bankrate reports that the average rate across all cards sits above 20%, with new card offers hitting 24.3%.
Reasons Behind Rate Hikes
The increase in credit card rates isn't without reason. Clifford Cornell, a financial planner at Bone Fide Wealth in New York, stated, "These are crippling rates that are compounding your debt at such a fast clip." The rise in rates is driven by banks seeking to protect themselves from potential borrower defaults. Matt Schulz, LendingTree's chief credit analyst, expressed that "this unfortunate trend could continue in coming months."
Impact on Borrowers
Not all credit card users feel the pinch from rising rates. Those who pay off their balance each month are not affected by APRs. However, those carrying debt are facing significant challenges. Another issue is that new balances incurred on cards are subject to the higher rates, while older debts remain tied to their original rates.
Current market conditions create complicated scenarios for many borrowers. While good credit scores can help lower rates, the overall upward trend in APR remains concerning.
