The cost of carrying a balance on your credit card is now the highest it’s been in more than 30 years.
According to survey data from Bankrate.com, the average credit card interest rate has climbed to 19.04%.
“Bankrate has been surveying credit card rates since 1985, and this eclipses the previous all-time high of 19.00% from July 1991,” Bankrate chief financial analyst Greg McBride wrote Wednesday.
The new high coincides with the Federal Reserve’s raising its key federal funds rate to a level not seen in more than a decade as it fights persistent inflation. The central bank hopes making it more expensive to borrow, will slow the economy and ease upward pressure on prices.
Increasing the federal funds rate cranks up what’s known as the prime rate. That’s the interest rate banks charge their most creditworthy customers. Currently, it is 7%. The final annual percentage rate for a credit card is determined by the prime rate plus a bank’s margin for lending to a given customer.
The new average is a substantial increase from the 16.3% average rate for credit cards at the beginning of the year. According to Bankrate, if you carry a $5,000 balance on a credit card — which is the current national average — making just the minimum payment each month at that rate would cost $5,517 in interest over 185 months, or about 15 years. At today’s 19.04% rate, you would pay $6,546.
