Prediction: Here's What the Average Credit Card Interest Rate Will Be in 2025

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The average credit card interest rate in the United States is 22.76% on existing credit card accounts, according to the latest data from the Federal Reserve. With the average American household carrying about $7,950 in credit card debt, many people struggle to pay off their debts.

Relief may be on the way, though. The Fed is expected to start lowering benchmark interest rates soon, and to continue gradually reducing them for the foreseeable future.

Here's what the latest expectations are, what it could mean for the average credit card interest rate in 2025, and what it might mean to you as a consumer.

The federal funds rate is set to fall

The Fed is expected to start lowering the federal funds rate at the conclusion of its meeting later in September. While experts are torn when it comes to the pace and magnitude of rate cuts, the general consensus is that we're going to see a significant reduction over the next year and a half or so.

When you hear that "the Fed cut rates," it typically refers to the benchmark interest rate known as the federal funds rate, the rate at which banks lend money overnight to each other.

According to the CME's FedWatch Tool, which analyzes the expected interest rate cuts, the median expectation is for a 1 percentage point reduction in rates by the end of 2024, and a total of 2.5 percentage points by the end of 2025.

Average credit card interest rates in 2025

Here's why this matters to credit card users. Credit card interest rates are directly dependent on the Federal Reserve's moves. Well, technically they are dependent on the prime rate, and the prime rate depends on the federal funds rate. In other words, if the Fed lowers the federal funds rate by 1 percentage point, your credit card interest rates would fall by the same amount soon after.

Based on the latest expectations for Fed rate cuts, I'd predict that the average credit card interest rate of 22.76% will fall to 21.76% by the end of 2024 and to 20.26% by the end of 2025.

It's also important to note that while credit card interest rates depend directly on the federal funds rate, the interest rates offered on new credit card accounts are also dependent on the economic climate. At the time of this writing, the average APR on a new credit card offer is nearly 25% -- more than 2 percentage points greater than the average existing credit card's APR.

In a nutshell, there's currently quite a bit of economic uncertainty, and credit card issuers seem to be taking this into consideration when determining borrowers' APRs.

Credit cards are still an expensive way to borrow

While credit card interest rates are likely to decline over the next year or so, that might not provide as much relief as you think. In simple terms, the difference between a 22.76% interest rate and a 20.26% interest rate in terms of the financial strain on your wallet really isn't that much. Even with the lower rate, the average U.S. household will still pay more than $1,600 in annual interest to their credit card companies.

However, it's also worth noting that while they are not directly tied to the Fed's interest rate moves, other consumer interest rates, such as those on mortgages , auto loans, and personal loans, tend to move in the same direction. So other, more affordable forms of borrowing could become cheaper as well.

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