While credit card
rates are at historic lows, the rates are rising. In the past four years, credit card rates have shot up by over 3.38 percentage points, translating into a higher month to month costs for consumers, according to data from the Federal Reserve of St. Louis
Several factors have contributed to higher rates. The Credit Card Accountability Responsibility and Disclosure Act of 2009 made it illegal for banks to raise interest rates on existing balances. Now banks factor in more risk through higher initial interest rates. Additionally, many Americans do not shop around for credit cards based on the interest rates but based on the benefits cards offer, which leaves rates untouched by market choices consumers make. NerdWallet
found that 38 percent of Americans do not know the interest rate on their credit cards.
Overall, the average U.S. household has about $5,700 in credit card debt
. The absolute amount of credit card debt nationwide is at a record level, standing at $870 billion according to the Federal Reserve, though this represents a smaller share of GDP than it has previously, now comprising only 4 percent of GDP.