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Data from CardRatings.com indicated that American credit card debt reached an all-time peak of $1.33 trillion in 2025. The figure illustrates the increasing financial strain on families who continue to use credit cards to cover their rising cost of living.
Almost half of families in the United States carry credit card balances from month to month, and credit card debt is one of the most expensive sources of financing, with an average interest rate now exceeding 20%.
Consumers are not receiving much relief, even after the Federal Reserve lowered interest rates, with rates on credit cards receiving only a modest adjustment. The increase in household borrowing is an indicator of weak wage growth and persistent inflation, according to industry analysts.
Interest rates on credit cards are typically pegged to the Federal Reserve's base rate. Any alteration in policy would immediately affect the rates on the cards in a few billing periods. In late 2024, the average credit card rate decreased by only 0.23% when the Fed reduced the interest rate by 0.1% points. The reduction in the average rate to 24.22% in the third quarter was due to a 0.09% decrease, caused by a quarter-point cut implemented last month.
According to Jennifer Doss, executive editor at CardRatings.com, the link between the Federal Reserve's rate decisions and credit card APRs is not as strong as many consumers think. She described the fact that issuers would adjust rates according to credit quality and general lending conditions, which restricts the impact of central bank policy. According to Jeff Sigmund of the American Bankers Association, the credit card market remains competitive.
Financial institutions still safeguard their margins by restricting the cuts in credit card rates. According to Ted Rossman, a senior industry analyst at Bankrate, lenders are likely to lower APRs for customers with high credit scores and maintain the same rates for those with weak credit histories.
According to a recent Bankrate survey, the rates on several store-branded credit cards have been increased despite the rate reduction made by the Fed. The rationale behind the move by lenders was the regulation that limited the late fees and other sources of income. Banks have continued to maintain high rates even after some of these rules were reversed following court challenges.
