The average interest rate for credit cards just reached the highest level since 1996 — and it’s likely to get even worse soon.
Consumers who carry a balance on credit cards are paying an average annual interest rate of 17.96%, according to Bankrate.com. That compares to 16.21% at this time last year.
The Federal Reserve’s aggressive rate hikes to curb inflation are largely behind the move, since many issuers base what they charge off benchmark interest rates.
“There’s a direct pass-through from the Fed’s actions to credit cardholders,” Ted Rossman, senior industry analyst for Bankrate, said in a statement. “And Federal Reserve Chairman Jerome Powell has made it clear that the Fed is not done raising rates — not by a long shot.”
At the same time, inflation is forcing consumers to rely more on credit cards as they battle high prices. Mastercard Inc. said in its latest earnings call that credit card spending by US consumers on its network increased 25% in the quarter, while a Bank of America study showed an increase in credit card usage in July among households making less than $20,000.
This article was provided by Bloomberg News.