The Federal Reserve has now cut the federal funds rate three times in 2025, closing the year at a target range of 3.50% to 3.75%. Credit card APRs have not fallen anywhere near as far.
Average rates on accounts accruing interest — the ones that matter, because they belong to people carrying a balance — remain in the low 20s, close to the record levels set in late 2024.
Why Card Rates Do Not Track the Fed
Almost every US credit card is a variable-rate product tied to the prime rate, which moves in lockstep with the federal funds rate. So the mechanical part does track.
What does not track is the margin — the fixed spread the issuer adds on top of prime. “Prime + 18.99%” is a contract term, and issuers have widened those margins steadily over the past several years. When prime falls by a quarter point, your rate falls by a quarter point from a starting position that was deliberately raised.
The net effect over 2025: prime came down roughly three quarters of a point, and the average card rate came down considerably less than that in practical terms, because new-account margins were being set higher at the same time.
The Two Numbers the Fed Publishes
The Fed’s G.19 consumer credit release reports two figures, and the gap between them tells the story:
- Average APR across all accounts — includes cards with promotional 0% periods and cards that are never carried, so it runs lower
- Average APR on accounts assessed interest — only accounts actually paying interest
The second is consistently one to two points higher than the first. If you carry a balance, the second number is your number.
What This Actually Costs
On a $6,000 balance at 22% making minimum payments, you are paying roughly $110 a month in interest alone before touching principal. A quarter-point Fed cut moves that by about a dollar.
Rate cuts are not the lever. These three are:
1. A balance transfer. A 0% intro APR for 15–21 months converts every dollar you pay into principal. Transfer fees run 3–5%, which is real but almost always cheaper than a year of interest at 22%. The requirement is a plan to clear the balance inside the promotional window — a transfer you do not pay off just relocates the problem at a higher post-promo rate.
2. Asking for a rate reduction. This works far more often than people expect for accounts in good standing, particularly ones with long tenure and rising credit scores. It is a five-minute phone call with a decent hit rate and no downside.
3. A personal loan. Fixed rate, fixed term, and typically well below card APRs for good credit. The discipline of an amortising schedule is doing as much work as the rate.
The One Thing Not to Do
Do not wait for rates to come down. Card APRs are sticky downward by design — the margin is contractual, and issuers have no competitive pressure to compress it while balances keep growing.
If you carry a balance, the return on paying it down is a guaranteed, tax-free 22%. There is no investment that reliably competes with that.
Sources: Federal Reserve G.19 Consumer Credit release; LendingTree, “Average Credit Card Interest Rate in America”
If you are carrying a balance into the new year, start with our balance transfer card comparison.