How credit card rates soared above 20% — and what to do about it

No, it’s not your imagination. Americans are paying more interest on credit cards than ever.

Drawing attention to these rising costs, President Donald Trump has called on Congress to cap credit card interest rates at 10% for one year. The proposal has drawn a mix of bipartisan praise and backlash from top bankers.

As of November 2025, the average credit card interest rate reached 20.97% for all accounts and 22.30% for accounts with balances, according to the Federal Reserve’s G.19 Consumer Credit report. Collectively, Americans owe a staggering $1.23 trillion in outstanding credit card debt, the highest level on record, the New York Fed reported.

 "We will no longer let the American Public be ripped off by Credit Card Companies that are charging Interest Rates of 20 to 30%," Trump posted on his social network Truth Social. Researchers at Vanderbilt University found a 10% rate cap would save Americans about $100 billion in credit card interest annually, but card issuers would likely cut back on rewards to lower-tier credit cardholders by as much as $27 billion to remain profitable.

While the rate cap would help make good on Trump's campaign promise to bring down rising costs for Americans, the measure would only be temporary. And industry groups say it could have unintended consequences for consumers who are already struggling financially.

The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America issued a joint statement in response to Trump’s proposal, warning the cap "would reduce credit availability and be devastating for millions of American families and small businesses."

The ABA said that the proposed rate cap would force issuers to close or drastically reduce credit lines of 74% to 85% of open credit card accounts, impacting as many as 159 million cardholders.

JPMorgan $JPM Chase Chief Financial Officer Jeremy Barnum echoed those concerns during the company’s fourth-quarter earnings call. He claimed a rate cap would cause consumers to "lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most."

How credit card interest rates got so high

Credit card issuers use a formula to set the annual percentage rate (APR) consumers are charged when they carry a monthly balance. A credit card’s APR is a variable interest rate based on the prime rate — a benchmark interest rate linked to the Federal Reserve — plus a margin set by issuers.

To determine the margin, lenders assess how likely you are to repay your monthly credit card balance based on your credit score, payment history and income. As with most lending products, the higher your credit score, the lower your interest rate.

“The market largely sets credit card rates," said Jason Steele, founder of CardCon and a veteran credit card expert.

When Steele began writing about credit cards in 2008, the prime rate plummeted to 3.25% as the Fed responded to the financial crisis. It stayed there for seven years and was down near zero through much of the pandemic, he explained.
But as inflation climbed, the Fed aggressively hiked rates to combat it, pushing credit card APRs higher, too. The prime rate reached 8.5% in July 2023, and currently sits at 6.75%.

"If you go all the way back to around 1980, it soared right up into the 20s," Steele said. "That was the prime rate, which is incredible, if you think about it, because the credit cards [rates] are above that."

Unlike a mortgage or auto loan that’s secured by an asset, credit cards are unsecured debt because there’s no collateral securing it if you default on your account. That’s why card issuers charge higher interest rates to account for the greater risk they assume.

Matt Schulz, chief consumer finance analyst at LendingTree, noted that credit card rates have been relatively stable since the Credit Card Act of 2009, moving primarily in response to Fed actions. After that law passed, he noted, First Premier Bank briefly carried an APR of 79.9% as issuers tested what the market would bear.

Credit card rewards programs push APRs higher

Credit cards with coveted travel points and cash-back rewards come at a steep cost card issuers make up for it through charging higher APRs, Steele said.

In 2022, card holders earned $41.1 billion in rewards, up 58% from $26.1 billion in 2019, according to a report from the Consumer Financial Protection Bureau (CFPB). With ABA data showing that 80% of Americans have at least one credit card that offers rewards, the consumer demand for plastic with perks isn’t going away anytime soon.

"Credit cards that don't offer rewards will always have a lower interest rate than a similar card that does," Steele said. Non-rewards cards typically offer rates two or three percentage points lower. "Cash-back rewards are really never worth paying a higher interest rate."

Schulz noted that a 10% rate cap could result in credit card issuers scaling back their rewards offerings, noting that the cap would be “a seismic change” for the industry. Plus, to make up for the lost revenue gained in higher APRs, credit cards might jack up their annual fees or reduce 0% balance transfer offers, Schulz noted.

How to avoid high credit card APRs

It’s unclear if a rate cap will ever materialize, but you don’t have to wait for that to happen to get a handle on credit cards with high interest rates. Here are expert tips to save money and avoid paying steep rates.

1. Pay balances in full. 

“It’s always, always, always better to avoid interest by paying your credit card balance in full and on time,” Steele said. This helps you avoid those high rates and, as a bonus, you’ll avoid a vicious debt cycle.

2. Make multiple payments within a month. 

If you carry a balance, pay as much as possible, as early as possible in the billing cycle, Steele recommends. Because credit card interest is assessed based on your average daily balance, paying down the balance before the due dates saves on interest.
“If I get my paycheck today but my due date is the 30th, if I pay it down now, I'm essentially saving seven days of interest on that payment," he said.

3. Request a lower rate.

If your rate is too high, you can simply request a lower one. “People don't realize that they can just call their credit card issuer and ask for a lower rate," Schulz said, adding that it works more often than people think. Credit card issuers would rather work with you and keep you as a customer rather than risk you defaulting on your payments or taking a 0% balance transfer offer elsewhere.

A 2024 LendingTree survey found that 83% of people who asked for a lower credit card rate received one, with the average reduction around 6.7 percentage points. That translates to annual savings of more than $1,600, LendingTree reported.

4. Consider balance transfers

If you have good credit and are struggling to get ahead with high interest rates, 0% balance transfer cards remain “about as good a weapon as you can have against credit card debt,” Schulz said.

If you don’t qualify because of your credit score, consider a personal loan instead. According to NerdWallet, average personal loan rates are closer to 14.48% for borrowers with good credit — far lower than average credit card APRs.

5. Choose no-frills cards over rewards cards

For anyone carrying a balance, Steele advised steering clear of rewards cards entirely and looking for simpler cards with the lowest interest rates. Shop around, especially with credit unions, which already have their rates capped at 18% by law.

"Credit unions exist to benefit their membership, whereas public corporations exist to benefit their shareholders," he said.

6. Avoid retail cards like the plague

Retail store cards have astronomical interest rates, usually 30% or higher, Schulz said. Those rates “used to be a rate that people only got as a penalty rate when they were late,” he added.

You’re better off choosing a general credit card with a lower rate so if you do run into trouble paying your balance in full, you’re not stuck with an outsized interest payment.