This article was originally published in February, 2024, but is updated quarterly to reflect the most recent available data.
Even though the Federal Reserve did not cut interest rates in the first quarter of 2025, the average credit card rate came down a little. However, whether you benefit from this depends on which credit card you have.
A new CardRatings survey found that less than a third of credit cards lowered their rates in the first quarter. A couple actually lowered rates by as much as 1.5%. Most were unchanged though, and those that did lower their rates typically did so by just 0.25%.
In a sense, some credit cards are playing catch-up. While the Fed lowered rates by 0.50% in the fourth quarter of 2024, the average credit card rate fell by just 0.10%. Even with an additional decline in the first quarter of this year, most credit cards still haven’t matched the Fed rate cut.
Differing responses to Fed rate cuts make this an opportune time for credit card customers to take a look at whether they’re getting a fair deal. Our credit card rate survey can give you some benchmarks for comparing how competitive your cards’ rates and fees are.
High, low and average credit card rates
In the first quarter of 2025, the average credit card rate in the CardRatings survey fell to 24.30%. This marked a reduction of 0.25% from the previous quarter.
A 0.25% reduction in the average interest rate is at least a step in the right direction. Even so, on top of the 0.10% drop in credit card rates in the fourth quarter that average rate still hasn’t matched the 0.50% total drop in the Fed funds rate during that quarter. So why the difference?
Most credit cards didn’t cut rates at all in the first quarter, and most of those that did only cut rates by 0.25%. This follows a familiar pattern. When the Fed makes a rate cut, credit card rates often don’t fall by as much. One reason is that credit card companies are being cautious. After all, the Fed tends to cut rates when the economy is slowing. When that happens, lending to consumers usually gets riskier.
The current situation is a good example. Late payment rates on credit cards have risen over the past two years. They’ve reached their highest level since 2011.
When more consumers fail to make their payments, credit card companies often respond by charging higher interest rates to make up for the added risk. With late payment rates rising, you can see why many credit card companies would be slow to lower their rates, even after the Fed had done so.
Another factor that is concerning to credit card companies is inflation. With the inflation rate perking up and the threat that tariffs could make it worse, credit card companies are likely to be more reluctant to reduce the interest rates they charge.
So, the real difference maker isn’t what the Fed or credit card companies in general are doing to change rates. It’s much more important which card you’re able to get and the rate you’re able to qualify for.
➤ LEARN MORE:How does the Federal Reserve impact credit card interest?
Impact of credit score on credit card interest rates
A big factor that determines the interest rate different customers pay is credit score. Again, credit card companies charge higher interest rates to make up for higher risk. So, customers with low credit scores tend to pay higher interest rates.
You’ve probably noticed that many credit cards advertise a range of rates, from low to high. These generally represent the difference between the best rates they offer customers with excellent credit and the higher rates given to people with weaker credit.
➤ SEE MORE:Why is it getting harder for people with low credit scores to get credit?
Annual credit card fees and impact on rates
While the average credit card rate fell during the latest quarter, the average annual fee charged also fell slightly. That average is now $134.14, which is $3.57 lower than it was in the fourth quarter of 2024. Just slightly more than half (51%) of the cards in the survey charge an annual fee.
➤ SEE MORE:Best credit cards with an annual fee
Tips for getting the best credit card deal
While the Fed has lowered interest rates, credit card companies have reacted in different ways at different times. With more rate cuts planned for the year ahead, expect the responses of credit card companies to continue to vary. That makes this an especially important time to take a look at the market and see which credit cards are being especially aggressive about cutting rates.
Beyond interest rates, there are other considerations in choosing a credit card. The following are some tips for getting the best deal for your needs:
- Decide how you’re going to use the card. How you use the card affects how important certain characteristics are. For example, if you don’t typically carry a balance, interest rates are less important than if you do. Also keep in mind how heavily you plan to use the card, and whether there are certain things like travel you’re likely to use the card for most.
- Consider rates, fees and rewards. Once you plan for how you’ll use the card, you can estimate the impact of interest rates, fees and rewards on your account. That will help you measure the trade-offs among these factors for your planned usage.
- Shop around to find the best terms for your situation. As the study found, there are wide ranges of fees and interest rates out there. A little comparison shopping can make a bigger difference than Fed rate cuts typically do.
- Work on your credit. The wide range of interest rates also indicates how much more you might have to pay if you have poor credit. This spread has been widening as credit conditions deteriorate. Working to improve your credit score can pay off by qualifying you for better credit card terms.
➤ SEE MORE:Best credit card offers
Measuring the average credit card interest rate – methodology
The CardRatings.com study looked at 51 popular credit card offers and their terms at the end of the first quarter of 2025. These offers represent a cross-section of different card types for varying credit qualifications. CardRatings calculated the overall average interest rate and fee. It also broke down the data into different groups such as fee and no-fee cards and minimum and maximum interest rates.
