Will Credit Card Rates Come Down? Five Pathways Comments on CBSNews.com

Credit card rates have been rising steeply for more than a decade. In 2015, the average rate charged by credit cards was 11%, in 2020 they were around 15%, now they sit at a record high of 23% on average.

Meanwhile, the economy is in a state of transition in this election year. Inflation is down, and the Federal Reserve, which sets interest rates in the United States, started easing rates in September of 2024, lowering its benchmark rate for the first time in four years by 0.50 percentage points.

That's good news for consumers seeking to borrow money, and you would think, for credit card users, too.

Could credit card rates fall below 20%, though? CBS News asked a slate of experts, including Nate Towers, CRPC®, Director of Five Pathways Financial.

"Looking forward over the next few months and even into 2025, I wouldn't get too excited about rates coming down," says Nate Towers. "Even with the Fed's recent drop in rates in September, it's not going to help those credit card companies budge right now."

In addition to the benchmark rate set by the Federal Reserve, credit card rates are affected by other factors. For instance, when the price of goods goes up but wage increases don’t keep up, credit card companies know that they can take advantage of the situation by increasing their APRs—therefore their profits—as people rely more on plastic to get the groceries and items they need. Additionally, consumer debt default, plus rising credit card fraud, can result in significant losses to credit card issuers. Charging higher rates can help offset overall losses and keep profits high.

So, unfortunately, this likely means a sub-20% credit card rate isn't in the cards for most consumers anytime soon. 

"A credit card rate decrease is about as likely as riding a unicorn to work," Towers says.

"For rates to drop substantially, we'd need a complete 180 — like the Fed putting the brakes on, inflation magically vanishing, and lenders suddenly deciding they've squeezed us enough," Towers says. "I'm not holding my breath for that one."

Read the entire article here: https://www.cbsnews.com/news/when-will-credit-card-interest-rates-drop-below-20/

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