Cameron DiGiovanni, Writer
@cdigiovanni20
Credit card interest rates are so high, averaging 22.76% for all new offers, because credit cards are unsecured and have no set timeframe for full repayment. Credit cards are riskier than other borrowing methods as a result, and issuers need to charge higher interest rates to compensate.
With mortgages and car loans, on the other hand, the house or car can be repossessed and resold by the lender when the balance is not paid off. But if a cardholder defaults on a credit card payment, there’s no guarantee that the lender will ever get their money back.
Legal caps on interest rates – or the lack thereof – also affect credit card APRs. In 1978, the Supreme Court ruled that card issuers could set their credit card interest rates based on the usury laws in the state they’re headquartered in. Usury laws put a legal cap on the interest rates that can be charged on a line of credit, but not all states have them. This means that banks can avoid usury laws by strategically choosing the location of their headquarters. They can then export high interest rates to states that normally wouldn’t allow them.
Finally, credit card interest rates are so high in part because people agree to pay them. Card issuers will continue offering these terms as long as consumers continue accepting them.
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People also ask
What is the highest credit card interest rate?
The highest credit card interest rate in recent memory was 79.9% on a card offered by First Premier Bank in 2010 but that offer’s not available anymore. The current highest credit card interest rate is 36% on the First PREMIER® Bank Mastercard Credit Card.
The next highest credit card interest rate seems to be 35.99%, charged by the Total Visa® Card and the Milestone® Mastercard®. These rates are very high when you consider that the average interest rate is only around 22.76%.
... read full answer by Jane Parker, WalletHub Credit Card AnalystAre high interest rates or low interest rates better?
Low interest rates are better than high interest rates when you’re borrowing money, whether it’s with a credit card or a loan. High interest rates are only good when you’re able to earn interest, such as when you put money in a savings account, checking account, CD or money market account.
The rate at which you’ll earn interest from a bank will be indicated as a percentage, followed by “APY” (annual percentage yield). With...
read full answer by Theresa Chalfant, WriterWhat is 24% apr on a credit card?
A 24% APR on a credit card is higher than the average interest rate for new credit card offers. A 24% APR means that the credit card’s balance will increase by approximately 24% over the course of a year if the cardholder carries a balance the whole time. For example, if the APR is 24% and you carry a $1,000 balance for a year, you would owe around $240.00 in interest by the end of...
read full answer by Chip Lupo, Credit Card WriterDid we answer your question?
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