Are Credit Cards a Thing of the Past or Still Relevant

Credit cards have been a staple in our wallets for decades, but their relevance is being questioned in today's digital age. Many of us are considering ditching our credit cards in favor of cashless payment methods.

According to a study, 70% of millennials prefer using digital payment methods over traditional credit cards. This shift towards contactless payments is a clear indication that credit cards may be on their way out.

However, credit cards still offer several benefits, such as rewards programs and purchase protection. For instance, a rewards credit card can earn you up to 5% cashback on certain purchases.

Despite the convenience of digital payments, credit cards provide a level of security and accountability that cashless methods often lack.

Credit cards have a significant economic impact, with the average American household carrying over $6,000 in credit card debt. This can lead to financial stress and difficulties in paying off balances.

The cost of credit card debt is not just the interest charged, but also the fees associated with late payments and balance transfers. In fact, credit card late fees can add up to over $12 billion annually.

Carrying high credit card balances can also limit one's ability to make large purchases or take on new debt, effectively freezing their credit. This can have a ripple effect on the overall economy, as consumers with frozen credit may be less likely to invest in big-ticket items or start new businesses.

The American economy has shown remarkable resilience in the face of the pandemic, with some industries experiencing growth while others struggled to stay afloat. The tech sector, for example, saw a surge in demand for remote work tools and online services.

The US unemployment rate peaked at 14.7% in April 2020, but has since declined to 6.2% by January 2022.

Many businesses had to adapt quickly to the new reality, with some pivoting to online sales and others implementing safety protocols to keep customers and employees safe.

The US GDP contracted by 3.4% in 2020, but rebounded by 5.7% in 2021.

Some industries, like healthcare and e-commerce, saw significant growth during the pandemic, while others, like hospitality and tourism, suffered greatly.

The US government implemented various stimulus packages to support affected businesses and individuals, including the CARES Act and the American Rescue Plan.

At least 50 large retailers raised interest rates on their store cards in the months before the Federal Reserve began cutting rates.

Big increases in interest rates were seen over the past year, with no major changes from the Fed during that time. This suggests that issuers were padding the profit margin.

Card companies are charging record-high margins, which is why card rates are higher now than they have ever been.

The average cardholder pays roughly 15% in annual interest on top of the prime rate, with credit card margins averaging 14.9% as of August.

Across the entire credit card industry, the margin has been going up and up, with many factors influencing the interest rates on those cards.

Interest rates on credit cards have been on the rise, with the average APR hitting historic highs. The average new credit card APR dropped for the fourth straight month since the Fed announced its rate cut, but it's unlikely to fall off a cliff overnight.

In recent years, credit card interest rates have become volatile, with rates rising significantly from 2015 to 2019 and then plummeting in 2020. However, the Fed reversed course in 2022 and raised rates seven times, followed by four more hikes in 2023.

Several big-box store cards charge as high as 35.99% interest, with retailers continuing to raise rates despite the Fed's pause on hikes. The average rate on store cards rose by more than a full percentage point between 2023 and 2024, with WalletHub finding an even bigger jump in average rates.

Here's a breakdown of the average APR on different types of credit cards:

The APR margin on credit cards has also increased significantly, with nearly half of the increase over the last 10 years driven by issuers raising their APR margin. The APR margin for revolving accounts is now at 14.3%, the highest point in recent history.

Higher interest rates on credit cards can be a real challenge for consumers. The average new credit card APR has dropped for the fourth straight month since the Fed lowered interest rates by a half-point, but it's still relatively high.

Credit card companies take a risk by extending credit to consumers with a wide range of credit scores, some of whom will not repay the debt. This risk is reflected in the high average APR of 24.26% on new credit card offers.

Store cards tend to charge more interest than other cards, partly because retail cardholders tend to earn lower income and have weaker credit. The APR on store cards can be as high as 28.81%, making it even more challenging for consumers to pay off their debt.

The APR margin, which is the difference between the APR and the prime rate, has also increased significantly over the last 10 years. In fact, it's now at 14.3%, the highest point in recent history. This means that even if the prime rate goes down, the APR on credit cards may not decrease as much.

Here's a breakdown of the average APR on different types of credit cards:

The high interest rates on credit cards are a result of the risk that credit card companies take by lending to consumers with varying credit scores. While the Fed's decision to lower interest rates may lead to a decrease in APRs, it's unlikely to fall off a cliff overnight.

The average interest rate on current credit card accounts is a crucial metric to understand. The Federal Reserve releases data on this every quarter, and it's essential to know the difference between average interest rates for accounts assessed interest and all credit card accounts.

The average APR for all credit card accounts is 21.47%, which is down from 21.76% in the third quarter of 2024. This decline is likely due to the Federal Reserve's decision to cut rates in September, November, and December.

A significant number of credit cardholders carry a balance, which is why it's essential to know the average APR for accounts assessed interest, which is 22.80%. This is significantly higher than the average APR for all credit card accounts.

Here's a breakdown of the average APRs for different types of credit card accounts:

It's essential to keep an eye on these numbers, as they can change over time. The Federal Reserve's decisions and economic trends can impact interest rates, so it's crucial to stay informed.

Credit card interest rates have undergone significant changes over the years, largely driven by the Federal Reserve.

Before 2015, credit card rates were relatively stable for several years, following the introduction of the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

The CARD Act, signed by former President Barack Obama, brought enormous change to the credit card space, setting limits on when issuers could raise cardholders' rates and changing how payments must be applied to balances.

Credit card rates became volatile for several years as banks determined what the market could bear, with one card even featuring a 79.90% APR for a short time.

The stability that lasted until 2015 was a result of the CARD Act's changes, which forced issuers to find new ways to recoup lost revenues.

In 2015, the Fed began raising interest rates, which helped push rates to the high levels we see today.

The Fed continued to raise rates until 2019, and then dramatically lowered them in 2020 in response to economic turmoil at the beginning of the pandemic.

However, in 2022, the Fed reversed course, raising rates seven times, and then continued to hike rates in 2023.

The Fed's recent actions, including a half-a-percentage-point cut in September 2024 and subsequent quarter-point cuts in November and December 2024, will be crucial in determining future interest rate changes.

We evaluated credit card APRs by examining online terms and conditions for about 220 credit cards from more than 50 issuers, including banks and credit unions.

To gather the data, we noted the standard purchase APRs listed for each card on each issuer's or retailer's website, excluding introductory or promotional rates.

We used data from the latest G.19 consumer credit report from the Federal Reserve for current credit card account APRs.

Credit card rates have hit historic highs, with some big-box store cards charging a staggering 35.99% interest. This is a red flag, especially for inflation-weary shoppers who may be tempted to put big purchases on a store card without realizing the interest they'll accrue if they fail to pay off the balance before the new year.

The average rate on a store card rose by over a full percentage point between 2023 and 2024, with Bankrate finding several big-box retailers charging 35.99% in annual interest. This includes Academy Sports + Outdoors, Big Lots, Burlington, Michaels, and Petco.

WalletHub found an even bigger jump in average rates on store cards, from 29.89% in 2023 to 33.07% in 2024. This is a significant increase, and credit card analysts are warning consumers to be careful.

The average rate across all commercial bank cards surged from 14.56% in February 2022 to 21.76% in August 2024, according to federal data. This means that credit card interest rates are likely to remain high for the foreseeable future.

Here are some examples of average interest rates on store cards:

It's essential to be aware of these high-interest charges and to use credit cards responsibly.

Credit card interest rates have changed significantly over the years, with rates rising from 2015 to 2019 and then being dramatically lowered in 2020 due to the pandemic. Rates have since increased again, with seven hikes in 2022 and four more in 2023.

The Federal Reserve's decisions have been a major driver of these changes, with the introduction of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, also known as the Credit CARD Act, bringing about a period of relative stability in credit card rates.

Before the CARD Act, credit card rates were largely stable for several years, but the law's introduction forced issuers to find new ways to recoup lost revenue, leading to more volatile rates. One card even featured a 79.90% APR for a short time.

Credit card rates tend to be higher than other interest rates, such as car loans or mortgages, because card companies take a risk by extending credit to consumers with a wide range of credit scores.

Store cards often charge more interest than other cards, partly because retail cardholders tend to earn lower income and have weaker credit.

Credit card interest rates have hit historic highs, with some big-box store cards charging as high as 35.99% annual interest.

The average rate on a store card rose by more than a full percentage point between 2023 and 2024, with several retailers charging 35.99% or 34.99% interest.

The average APR margin is the highest on record, with nearly half of the increase in average APR over the last 10 years driven by issuers raising their APR margin. This is the interest charged above the prime lending rate.

Credit card margins average 14.9% as of August, with the average cardholder paying roughly 15% in annual interest on top of the prime rate.

The average interest rate on current credit card accounts is 21.47%, with accounts assessed interest averaging 22.80%.