Credit Card Interest Rates in 2025: A Modest Decline

As we approach the new year, many consumers are wondering what lies ahead for credit card interest rates. The good news is that, according to experts, we can expect a slight decrease in rates in 2025. However, the decline is not expected to be significant, and rates will likely remain relatively high.

In 2024, the Federal Reserve cut its benchmark short-term interest rate, the federal funds rate, by a full point. However, the average credit card rate only dropped from 20.74 percent at the start of the year to 20.27 percent at last check. This indicates that the impact of the Fed's rate cuts on credit card interest rates may not be as substantial as some might expect.

Bankrate chief financial analyst Greg McBride, CFA, predicts that the average credit card rate will fall about half a percentage point over the course of the next year. This would nudge the average down to a still-high 19.80 percent. McBride expects three quarter-point rate cuts from the Federal Reserve in 2025, but he doesn't believe the average credit card rate will decrease quite that much.

The average credit card rate responds to more than just Fed interest rate cuts. Examples include new card products with low-rate offers for applicants with good credit and padded margins for applicants with weaker credit. This means that while the Fed's rate cuts may contribute to a slight decrease in credit card interest rates, other factors will also play a significant role in determining the overall direction of rates.

In conclusion, while credit card interest rates are expected to decline slightly in 2025, the decrease is not expected to be substantial. Rates will likely remain relatively high, and consumers should continue to be mindful of their credit card debt and make efforts to pay down balances. By staying informed and taking proactive steps to manage their credit card debt, consumers can minimize the impact of higher interest rates on their financial well-being.