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Historical Credit Card Interest Rates, Nominal and Inflation-Adjusted

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Credit card interest rates in 2016 were still among the lowest they’ve been in the past 30 years, at least in purely nominal terms. However, most economists would tell you that looking at nominal interest rates over time doesn’t tell you much. When looking at historical interest rates, it’s important to adjust for the effects of inflation.

For example, according to the Federal Reserve, the average APR charged on accounts that incurred interest in 2016 was 13.56%. That’s essentially the same as in 2008, when the average rate was 13.57%.

But the inflation rate in 2016 was just 1.26%, quite low by historical standards. What economists refer to as the “real” interest rate is the nominal rate minus the rate of inflation. So the average real credit card rate in 2016 was 12.30%. In 2008, by contrast, inflation was 3.85%, so the real credit card rate that year was 9.72%, the lowest since 1981.

Same nominal rates, significantly different real rates.

The chart below tracks average credit card rates in both nominal and real terms, along with the Consumer Price Index, the the federal statistic used to measure inflation. At the end of this article, you can see the data in table form.

 

Economists will argue all day about whether the CPI does an accurate job of tracking the rise and fall of prices. Even the Bureau of Labor Statistics, which compiles the index, is quick to acknowledge some of the shortcomings of CPI, but for our purposes it’s a decent proxy for changing prices.

One thing you’ll notice in looking at the chart above is that in the late 1970s and early ’80s, nominal credit card interest rates were much higher than they are today, but because inflation was also high — in the double digits — real rates were actually much lower.

Rates have come down since then, but so has inflation. In 2009, during the depths of the Great Recession, the inflation rate was negative, meaning prices dropped overall. When that happens, the real rate is actually higher than the nominal rate.

Credit card APRs have been climbing slowly since the Federal Reserve began boosting rates in late 2015, but rates remain low when viewed historically. Low rates aren’t just limited to credit cards. You’ve probably noticed, that your checking account, CDs and savings accounts aren’t exactly raking it in.

» MORE: How is credit card interest calculated?

Average interest charged by commercial banks, on credit cards, 1974-2016.

Year Average credit card interest rate (“nominal” rate) Inflation rate Average rate in excess of inflation (“real” rate)
1974 17.20% 11.03% 6.17%
1975 17.16% 9.19% 7.97%
1976 17.05% 5.76% 11.29%
1977 16.88% 6.50% 10.38%
1978 17.03% 7.62% 9.41%
1979 17.03% 11.22% 5.81%
1980 17.31% 13.58% 3.73%
1981 17.78% 10.35% 7.43%
1982 18.51% 6.16% 12.35%
1983 18.78% 3.22% 15.56%
1984 18.77% 4.30% 14.47%
1985 18.69% 3.55% 15.14%
1986 18.26% 1.91% 16.35%
1987 17.92% 3.66% 14.26%
1988 17.78% 4.08% 13.70%
1989 18.02% 4.83% 13.19%
1990 18.17% 5.39% 12.78%
1991 18.23% 4.25% 13.98%
1992 17.78% 3.03% 14.75%
1993 16.83% 2.95% 13.88%
1994 15.77% 2.61% 13.16%
1995 15.79% 2.81% 12.98%
1996 15.50% 2.93% 12.57%
1997 15.57% 2.34% 13.23%
1998 15.59% 1.55% 14.04%
1999 14.81% 2.19% 12.62%
2000 14.91% 3.38% 11.53%
2001 14.44% 2.83% 11.61%
2002 13.09% 1.59% 11.50%
2003 12.92% 2.27% 10.65%
2004 13.21% 2.68% 10.53%
2005 14.54% 3.39% 11.15%
2006 14.73% 3.24% 11.49%
2007 14.68% 2.85% 11.83%
2008 13.57% 3.85% 9.72%
2009 14.31% –0.34% 14.65%
2010 14.26% 1.64% 12.62%
2011 13.04% 3.16% 9.88%
2012 12.96% 2.07% 10.89%
2013 12.95% 1.47% 11.48%
2014 13.19% 1.62% 11.57%
2015 13.66% 0.12% 13.54%
2016 13.56% 1.26% 12.30%
Sources: Credit card rates reported by Federal Reserve in the Federal Reserve Statistical Release; rates are only for accounts that were charged interest. Consumer Price Index data compiled by Inflation.eu

 

Updated April 11, 2017