Credit card accounts that were charged interest paid an average of 22.36 percent in August, up from 22.15 percent in the second quarter, the Federal Reserve said October 7. Across all card accounts, including those that pay in full every month, the average was 21.19 percent, against 20.94 percent in the second quarter. Both readings were taken before the quarter-point rate increase the Fed approved September 16. That makes August the last look at card pricing before the first policy move of the fall could reach monthly statements, and the next reading will show how much of it did.
For a cardholder who pays the full statement balance each month, the 21.19 percent figure is largely academic, because no interest is charged. For anyone who carries a balance, 22.36 percent is the number that applies: each $1,000 left unpaid for a year accrues about $224 in interest at that average, before any compounding. Individual cards sit well above and below both averages, and the Fed’s numbers describe the average across issuers, not the rate on any one cardholder’s agreement.
The Fed’s 3-3/4 to 4 percent target range is back on the agenda October 27 and 28, and the G.19 that carries the card rate comes out around the fifth business day of each month.
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Two card rates, two groups of cardholders
The Fed publishes two card figures, and they answer different questions. In the Board’s explanation of the G.19 data, the all-accounts rate is a simple average of purchase annual percentage rates weighted by the number of accounts, so it includes cardholders who never revolve a balance. The accounts-assessed-interest rate covers only cardholders who do, and it is weighted by balances, so heavier borrowers count for more. The 1.17-point gap between 22.36 and 21.19 percent reflects who is counted and how, not two different kinds of card.
The interest-assessed rate has risen on every reading in the Fed’s table: 21.52 percent in the first quarter, 22.15 percent in the second as revised, and 22.36 percent in August. The all-accounts rate moved less and not in a straight line, going from 21.00 to 20.94 percent before rising 0.25 points to 21.19. The 0.21-point rise in the interest-assessed rate since the second quarter is smaller than the 0.63-point jump between the first quarter and the second, so the climb slowed even as the rate reached the highest of the three readings.
August came before the September rate increase
The Federal Open Market Committee, chaired by Kevin Warsh, voted 12-0 on September 16 to raise the target range for the federal funds rate by a quarter point, to 3-3/4 to 4 percent, according to the minutes of that meeting. The Committee’s statement said “Inflation remains elevated” and that the action “will support a timelier return to the Committee’s 2 percent goal.” Because the August card rates were measured before that vote, they show pricing ahead of the increase, not after it.
The Fed’s own staff told the Committee that outside of residential mortgages, consumer credit borrowing costs “were little changed over the intermeeting period.” The same minutes say credit card balances “grew moderately in the second quarter” and that average credit card limits “continued to increase.” Nothing in them forecasts where card rates will settle. The Fed’s table lists the card rates for August, the second quarter and the first quarter, and shows June and July as not available, so there is no monthly path to follow between the readings.
Card balances shrank while the rate rose
In the Fed’s August consumer credit release, revolving credit, the category that includes credit cards, decreased at a seasonally adjusted annual rate of 4.2 percent and stood at $1,352.4 billion. Nonrevolving credit, which covers loans such as auto and student debt, increased at a 4.1 percent rate to $3,844.4 billion. Total consumer credit grew at a 1.9 percent annual rate to $5,196.8 billion. Revolving debt fell in the same month the cost of carrying it was measured at its highest of the three readings.
A smaller revolving balance charged at a higher average rate can have several causes: cardholders paying down debt, issuers holding back new credit, or fewer purchases. The release does not say which one drove August, and it reports no breakdown by income or age. What the numbers do show is that the cost of carrying a card balance has not eased while the pool of borrowed money shrank, which leaves the September increase as the open variable for the next reading.
Card rates after the October 27 and 28 meeting
The Committee’s next meeting is Tuesday and Wednesday, October 27 and 28. The September minutes say most participants judged that another increase in the target range “would likely be appropriate by year end.” A second quarter-point move would put the range at 4 to 4-1/4 percent. How quickly any of that reaches card statements is what the next G.19 will begin to answer.
The Fed posts that data free on its G.19 release page, which says the figures come out around the fifth business day of each month. The August readings of 22.36 and 21.19 percent are the baseline. Until a later reading is published, the first test of how the September increase and the Committee’s signal of a possible second one feed into what a cardholder is charged has not yet been run.
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This article was produced with AI assistance and reviewed by The Money Overview’s editorial team.
