Interest Rates on Credit Cards Hit 26-Year High

Source: American Banker

The average interest rate on variable-rate credit cards reached a quarter-century high of 18.03% this week as lenders responded to rate hikes by the Federal Reserve.

Rates charged to cardholders have increased by 1.5 percentage points since June 25, according to data from Bankrate.com, a consumer finance website. The data, which uses three-month trends, is based on rates for 130 credit cards issued by 50 large consumer lenders.

This week's average rate is the highest Bankrate has estimated since January 1996, when rates climbed to 18.12%. The data goes back to 1985, and the highest recorded rate of 19% came in 1991.

As credit card rates have climbed, the margin between what card issuers charge their customers and the Federal Reserve's prime rate has risen to 12.53%. That margin is "not that different from the last rate-hike cycle," said Ted Rossman, senior industry analyst at Bankrate.