4 ms·

Can someone summarize the average interest-rates banks charge for credit-card debt? I heard some wild numbers a few months ago but they might be outdated.

NDizzle 6y ago
Hard to say what the average is across all credit cards. When I was young my interest rate was fuck%, but now that I’m over 40 with a good history it’s 9.24%. I don’t keep a balance, though, I just use it for 1) fraud protection, 2) points.
wallflower 6y ago
This isn’t answering your question. However, a friend who worked at a large credit card issuer said their break-even interest rate to support operations was 9.9%. Everything after that was profit.
- CapriciousCptl 6y ago
  Completely depends on the default rate. That 9.9% won’t go very far if your default rate doubles or worse.
nateburke 6y ago
Double digit percentages. 15-20%. Sometimes more. Interest charged to people who do not pay down balances is the primary way the banks behind CCs (not Visa, mc, etc, they just take tiny slices of every transaction) have a business.
- jb775 6y ago
  It's crazy to see the interest rates we've come to accept as a society considering that "interest" (otherwise known as "usury") has been considered illegal in many periods throughout history.
  - imtringued 6y ago
    That's a perfectly reasonable interest rate. Imagine you borrow $1000 at an APR of 15% and for some reason decide to only pay $22 per month. You have 68 months to pay the full amount back until you pay $500 in interest. If you had decided to pay $100 per month you'd pay $75 in interest in total. Meanwhile payday lenders will let you borrow $1000 for 3 months. You have to pay back $500 each month and if you can't pay it off within three months you will have to pay additional fees. That is basically a 500% APR. There is no need to hate credit card companies. They are doing a perfectly fine job. They obviously have higher rates than regular loans simply because buying something with your credit card doesn't require approval from the company. When you apply for a regular loan it is often tied to a specific purchase that can be repossessed or directly increases your income and therefore ability to repay the loan.
- samsonradu 6y ago
  But when exactly do these get applied? If you can’t settle at the end of a month you go into the next one with 115% of the debt?
  - kccqzy 6y ago
    No the double digit percentages are annualized interest rates, not monthly. For mine, interest starts accruing from the date of purchase for each purchase, except if you pay your new balance in full in the first statement. Generally the bank calculates it on a daily basis. You should read your account agreement to figure out how your bank calculates this. Mine is here on page 11: https://www.chase.com/content/feed/public/creditcards/cma/Chase/COL00083.pdf https://www.chase.com/content/feed/public/creditcards/cma/Ch...
    - samsonradu 6y ago
      Thank you for the link. We mostly have debit cards in this part of the world. It’s hard for me to understand laying any interest for consumption goods purchases. It is still not fully clear when does the settlement happen? At the end of each month, with a ~1.5% interest applied on the negative balance?
      - kccqzy 6y ago
        That depends. For some like the Apple credit card they have a simple due date that's the end of every month. For others they often allow you to choose a day of the month as a due date (perhaps aligning with your paycheck date) and is shown on your statement, which gets produced about a month before the due date. And if by the due date you didn't pay off the entire new balance, the interest charges will then appear on the next statement. Now you can see that for reasonably well off people credits cards offer a nice interest-free float. For example you make a large purchase of $1000 on January 15, but your statement gets produced on February 10 with a due date of March 4. Et voilà you can pay for that $1000 on March 4 with zero interest.
IdoRA 6y ago
Depends on your credit and the bank and the card type. A low-rate credit union card can be at 7.49%. Fancy travel and rewards cards are higher, e.g. 15.99% or above. Apple Card is between 10.99% and 21.99%.

NDizzle 6y ago

Hard to say what the average is across all credit cards. When I was young my interest rate was fuck%, but now that I’m over 40 with a good history it’s 9.24%. I don’t keep a balance, though, I just use it for 1) fraud protection, 2) points.

wallflower 6y ago

This isn’t answering your question. However, a friend who worked at a large credit card issuer said their break-even interest rate to support operations was 9.9%. Everything after that was profit.

CapriciousCptl 6y ago
Completely depends on the default rate. That 9.9% won’t go very far if your default rate doubles or worse.

nateburke 6y ago

Double digit percentages. 15-20%. Sometimes more. Interest charged to people who do not pay down balances is the primary way the banks behind CCs (not Visa, mc, etc, they just take tiny slices of every transaction) have a business.

jb775 6y ago
It's crazy to see the interest rates we've come to accept as a society considering that "interest" (otherwise known as "usury") has been considered illegal in many periods throughout history.
- imtringued 6y ago
  That's a perfectly reasonable interest rate. Imagine you borrow $1000 at an APR of 15% and for some reason decide to only pay $22 per month. You have 68 months to pay the full amount back until you pay $500 in interest. If you had decided to pay $100 per month you'd pay $75 in interest in total. Meanwhile payday lenders will let you borrow $1000 for 3 months. You have to pay back $500 each month and if you can't pay it off within three months you will have to pay additional fees. That is basically a 500% APR. There is no need to hate credit card companies. They are doing a perfectly fine job. They obviously have higher rates than regular loans simply because buying something with your credit card doesn't require approval from the company. When you apply for a regular loan it is often tied to a specific purchase that can be repossessed or directly increases your income and therefore ability to repay the loan.
samsonradu 6y ago
But when exactly do these get applied? If you can’t settle at the end of a month you go into the next one with 115% of the debt?
- kccqzy 6y ago
  No the double digit percentages are annualized interest rates, not monthly. For mine, interest starts accruing from the date of purchase for each purchase, except if you pay your new balance in full in the first statement. Generally the bank calculates it on a daily basis. You should read your account agreement to figure out how your bank calculates this. Mine is here on page 11: https://www.chase.com/content/feed/public/creditcards/cma/Chase/COL00083.pdf https://www.chase.com/content/feed/public/creditcards/cma/Ch...
  - samsonradu 6y ago
    Thank you for the link. We mostly have debit cards in this part of the world. It’s hard for me to understand laying any interest for consumption goods purchases. It is still not fully clear when does the settlement happen? At the end of each month, with a ~1.5% interest applied on the negative balance?
    - kccqzy 6y ago
      That depends. For some like the Apple credit card they have a simple due date that's the end of every month. For others they often allow you to choose a day of the month as a due date (perhaps aligning with your paycheck date) and is shown on your statement, which gets produced about a month before the due date. And if by the due date you didn't pay off the entire new balance, the interest charges will then appear on the next statement. Now you can see that for reasonably well off people credits cards offer a nice interest-free float. For example you make a large purchase of $1000 on January 15, but your statement gets produced on February 10 with a due date of March 4. Et voilà you can pay for that $1000 on March 4 with zero interest.

IdoRA 6y ago

Depends on your credit and the bank and the card type. A low-rate credit union card can be at 7.49%. Fancy travel and rewards cards are higher, e.g. 15.99% or above. Apple Card is between 10.99% and 21.99%.