{"id":21854,"date":"2025-10-16T23:50:07","date_gmt":"2025-10-16T23:50:07","guid":{"rendered":"https:\/\/finderica.com\/?p=21854"},"modified":"2025-10-16T23:50:07","modified_gmt":"2025-10-16T23:50:07","slug":"why-credit-card-aprs-arent-coming-down-even-after-a-fed-rate-cut","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=21854","title":{"rendered":"Why credit card APRs aren\u2019t coming down, even after a Fed rate cut"},"content":{"rendered":"
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Americans may feel somewhat removed from the Federal Reserve, but the central bank’s moves have a ripple effect on many types of consumer products, most notably the credit cards in their wallet.<\/p>\n

Nearly half<\/a> of American households have credit card debt and pay more than 20% in interest, on average, on their revolving balances \u2014 making credit cards one of the most expensive ways to borrow money.<\/p>\n

“For millions of American households, credit card debt represents their highest-cost debt by a wide margin,” said Ted Rossman, senior industry analyst at Bankrate.\u00a0<\/p>\n

Since most\u00a0credit cards\u00a0have a variable rate, there’s a direct connection to the Fed’s benchmark. When the Fed cuts rates, the prime rate lowers, too, and the interest rate on that credit card debt is likely to follow within a billing cycle or two.<\/p>\n

And yet, credit card APRs aren’t falling much at all.<\/p>\n<\/div>\n

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Read more CNBC personal finance coverage<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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Consumers hoping for “an automatic, proportional drop” in their credit card interest rates “may be disappointed,” according to a new report<\/a> by CardRatings.com.<\/p>\n

When the Fed cut rates in the second half of 2024, lowering its benchmark by a full point by December, the average credit card rate fell by only 0.23% over the same period, CardRatings\u00a0found.<\/p>\n

The central bank lowered its benchmark rate\u00a0by a quarter point again last month. Yet the average credit card rate in the CardRatings survey was 24.22% for the third quarter, down just 0.09%<\/a> from the previous quarter.<\/p>\n

The correlation between the Fed funds rate and credit card rates is often “weaker” than expected, said Jennifer Doss, CardRatings.com’s executive editor. Credit card rates are also “heavily influenced by credit conditions and individual credit scores,” she said.<\/p>\n<\/div>\n

<\/a>‘A highly competitive market’<\/h2>\n
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“If the Fed continues to lower interest rates, consumers will likely see some declines in credit card APRs, but that may take some time and could vary depending on the type of card and individual issuer,” said\u00a0Jeff Sigmund,\u00a0a spokesman for the American Bankers Association.<\/p>\n

“Credit card interest rates are set in a highly competitive market,” he said.<\/p>\n<\/div>\n

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Generally, card issuers have several ways to mitigate their exposure to borrowers who could fall behind on payments or default. For example, issuers may trim back the lower end of the APR range (what’s charged to more creditworthy borrowers) but not the high end, said Rossman.<\/p>\n

For some retail credit cards, APRs are even rising, despite the Fed’s moves, according to a Bankrate\u00a0survey<\/a>. Banks that issue store-branded credit cards have said maintaining higher APRs was necessary\u00a0following a Consumer Financial Protection Bureau\u00a0rule\u00a0limiting\u00a0what the industry can charge in late fees.<\/p>\n

But even after bank trade groups succeeded in\u00a0killing<\/a>\u00a0the CFPB rule\u00a0earlier this year, some credit card companies, including Synchrony\u00a0and\u00a0Bread Financial,\u00a0said they would not roll back the hikes.<\/p>\n<\/div>\n

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Even if your credit card rate were to fall by a full quarter point, in lockstep with the Fed’s latest cut, it might go from 20.12% to 19.87%, Rossman said, “that’s still very high-cost debt.”<\/p>\n

At these rates, there isn’t much in the way of relief for consumers. “We’re talking a difference of $1 a month for someone making minimum payments toward the average balance,” Rossman said.<\/p>\n

Of course, only consumers who carry a balance\u00a0from month to month\u00a0feel the pain of high APRs.\u00a0<\/p>\n

“The real consumer benefit lies in making your personal credit card rate 0%, either by paying in full \u2014 if you can \u2014 or signing up for a 0% balance transfer card,” Rossman said of cards offering 12, 15 or even 21 months with\u00a0no interest on transferred balances.<\/p>\n

Subscribe to CNBC on YouTube.<\/strong><\/em><\/a><\/p>\n<\/div>\n<\/div>\n

Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Americans may feel somewhat removed from the Federal Reserve, but the central bank’s moves have a ripple effect on many types of consumer products, most notably the credit cards in their wallet. Nearly half of American households have credit card debt and pay more than 20% in interest, on average, on their revolving balances \u2014<\/p>\n","protected":false},"author":1,"featured_media":21855,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[196],"tags":[1992,1824,369,173,238,419,137,138],"class_list":{"0":"post-21854","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-finance-news","8":"tag-aprs","9":"tag-arent","10":"tag-card","11":"tag-coming","12":"tag-credit","13":"tag-cut","14":"tag-fed","15":"tag-rate"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/21854","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21854"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/21854\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/21855"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21854"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21854"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21854"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}