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Credit Card Interest Rate Margins Reach All-time High

February 24, 2024
in Business
Credit Card Interest Rate Margins Reach All-time High


The Consumer Financial Protection Bureau on Thursday said that the interest credit card companies earn on their loans has hit an all-time high.

According to the agency, the average APR margin, which is the difference between the average annual percentage rates and the prime rate, has reached an all-time high.
Annual percentage rates or APRs are the annualized interest rate that credit card issuers charge for carrying a balance on the card.

The average annual percentage rate on credit cards increased to a record-high 22.8% in 2023 from 12.9% in 2013, according to the bureau.

In 2023, excess APR margin may have cost the average cardholder over $250, the report says. Major credit card companies earned an estimated $25 billion in additional interest revenue by raising the APR margin.

Despite lower charge-off rates and a relatively stable share of subprime borrowers, the increase in the average APR margin has fueled issuers’ profitability over the past decade, the bureau said. Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities.

The bureau said it had found high levels of concentration in the consumer credit card market and evidence of practices that inhibit consumers from finding alternative products.

“These practices may help explain why credit card issuers have been able to prop up high-interest rates to fuel profits,” it said.

Copyright © 2024, RTTNews.com, Inc. All Rights Reserved.

Tags: Economic NewsTop story

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