Americans Spent Roughly $25 Billion in Credit Card Interest Last Year

Feb 28, 2024Banks & Credit Unions, News

A recent analysis by the Consumer Financial Protection Bureau (CFPB) found that the average annual percentage rate (APR) on credit cards almost doubled in 2023 to 22.8 percent from 12.9 percent in 2013, resulting in a total $25 billion cost in interest fees last year. At the end of last year, the average APR hit the highest level on record.

“Since finance charges are typically part of the minimum amount due, this additional interest burden may push consumers into persistent debt, accruing more in interest and fees than they pay towards the principal each year—or even delinquency,” the CFPB wrote.

The New York Federal Reserve found that U.S. credit card debt topped $1.1 trillion during the last quarter of 2023, along with increased delinquencies. A Bankrate analysis also found that 36 percent of Americans said they had more credit card debt than emergency savings for the last two years.

APR margins generate profit to offset the risk of lending money to consumers, and those that stayed near 10 percent began to increase around 2019, and hit a high of 14.3 percent last year. The CFPB also found that the prime rate rose to 8.5 percent as the Fed hiked interest rates.

The CFPB also released a report with findings that larger credit card companies offered worse terms and greater fees than smaller companies, and the Bureau noted that using smaller banks with lower rates could save consumers an average of $400 to $500 annually.

The Bureau concluded “high levels of concentration in the consumer credit card market and evidence of practices that inhibit consumers’ ability to find alternatives to expensive credit card products. These practices may help explain why credit card issuers have been able to prop up high interest rates to fuel profits.”

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