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- Interest rate caps are controlled at the state level by usury laws, but those laws have a long list of exemptions.
- Credit card companies and banks are often exempt from state usury laws, meaning that there are no maximum credit card interest rates at the state level.
- Due to federal laws, there are some interest rate caps in place, but those are reserved for special circumstances, like being enlisted in the military or working with a federally chartered credit union.
Is there any limit to how high your credit card interest rates can go? You may be surprised to learn that generally, there isn’t. As cardholders are aware, average card interest rates have been on the rise, going from about 19.2 percent at the end of November in 2022 to 20.72 percent now, just a year later.
This year’s upward trend has been influenced by the Federal Reserve’s fight against inflation. This has caused the central bank to move up its target interest rate, which influences variable card rates for consumers. Besides Fed-influenced rises, there are some other situations in which your card issuer can raise interest rates on your account without notice.
When can your card’s interest rate go up?
For one, if you have an introductory 0 percent APR, your issuer will raise your rate automatically once the promotional period ends.
And if you don’t make at least your minimum payment for 60 days, your issuer could impose a penalty interest rate on your account.
Otherwise, a card issuer generally cannot hike up your interest rate during the first year you open the account. After that period, other than in the situations outlined above, it must notify you 45 days in advance about any rate changes, per the Credit Card Accountability Responsibility and Disclosure Act — or CARD Act.
New transactions you enter more than two weeks after this notice period will be charged at the new rate. If you don’t want to agree to the interest rate change, you can cancel your credit card, instead. In that case, you’d pay off any existing balances on the account at your lower current rate.
There is no limit on card interest rates
As for how high your card interest rate can go, the CARD Act did not establish a ceiling. Usury refers to lending at a rate of interest that is so high as to be unreasonable. While many states have usury laws that limit the interest rates that lenders can charge, a lot of these state laws don’t apply in practice to credit card rates. Instead, they apply mainly to loans, and even then, financial institutions tend to get around them through exemptions.
Maximum credit card interest rates by state
Because there are so many exemptions to usury laws, states simply don’t have maximum credit card interest rate caps. In California, for example, the state’s usury law limits rates on consumer loans to 10 percent. However, California also exempts loans made by banks and credit unions from this usury law. Many other states also exempt banks from their usury laws.
And banks can charge the interest rates prevailing in the state where they are headquartered, rather than in the consumer’s state. That’s why credit card issuers tend to be based in states such as Delaware and South Dakota that don’t have interest rate ceilings on credit card debt.
In some circumstances, banks can even charge the rates permitted in a state where it has branches and not where it has its headquarters, even if the borrower lives in another state. This means that the only financial institutions typically affected by usury laws tend to be lending companies that are not part of a bank, such as payday lenders.
Practically speaking, there is no limit on how high your card interest rate can go.
Highest credit card interest rates
Even though usury laws don’t affect credit card companies, they still tend to offer APRs within a reasonable range that’s dependent on a variety of factors. This is because these card issuers still want to remain competitive and don’t want to risk pushing their products too far out of the range of what a consumer would apply for. Here’s a list of issuers and the maximum APRs they’re offering on various card products at the time of writing:
- American Express — 29.99 percent variable APR on multiple cards, including the Delta SkyMiles®cards and the Blue Cash Everyday® Card
- Capital One — 30.74 percent variable APR on multiple cards, including the Capital One Platinum Credit Card
- Discover — 28.24 percent variable APR on multiple cards, including the Discover it® Cash Back and the Discover it® Miles
- Chase — 29.49 percent variable APR on the Chase Sapphire Reserve® card
Keep in mind that these interest rates are the listed maximums for a card’s APR range, which can vary based on the card applicant’s personal creditworthiness and the Federal Reserve’s prime rate. This means that applicants could still get a lower rate on many of these cards. Some cards may also have higher APRs because they don’t need the cardholder to have as high of a credit score to be approved, while others might offer perks and rewards that make the APR seem worthwhile.
No matter what credit card you own, it’s important to make sure you know your card’s APR, especially since your state’s usury laws likely won’t matter to your card issuer.
Rate caps still apply in some cases
However, there are some situations in which consumers do get the protection of a cap on their interest rates. One exception is for cards issued by a credit union. The law states that federally chartered institutions can’t charge their members a rate higher than 18 percent, including all finance charges, on their unpaid balances.
Also, if you are actively serving in the military or a covered dependent of such a person, the Military Lending Act caps the interest rates, including finance charges, on your credit card debt at 36 percent.
For any loans taken out or credit card debt incurred before you became an active servicemember, the Servicemembers Civil Relief Act provides relief, with interest rates on cards for military members capped at 6 percent. This is to ensure that servicemembers can focus their attention on serving the nation. For loans, you’ll need to notify your lender about your military service and ask for the cap.
Attempts to cap rates
There have been some attempts to set national interest rate caps on credit card debt. For instance, the Veterans and Consumers Fair Credit Act would cap interest rates for consumers at 36 percent by extending the Military Lending Act’s interest rate cap to civilians, too.
And in 2019, an attempt by Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez to set a 15 percent cap on credit card interest rates didn’t take off. Their proposed federal law would also have allowed states to create even lower interest rate caps.
“We will send a clear message to the modern-day loan sharks that we will not allow them to make billions off of keeping working Americans in a state of perpetual debt,” Sanders said at the time, in an online statement. “We must stop the exploitative lending practices suppressing economically distressed communities. We must ensure every American has the opportunity to grow financially.”
The bottom line
The CARD Act does not include a cap on credit card interest rates. While there are state-level interest rate caps and usury laws, many of those laws don’t apply to credit card rates in practice. Moreover, banks can charge the interest rates that apply in the states where they are based, rather than in the state you live in.
You should read the fine print of your card’s agreement to find out which state’s laws apply to your credit card balance. Your card issuer will generally have to give you 45 days’ advance notice in case it wants to hike up your rate.
Information about the Platinum Mastercard® from Capital One and the Delta SkyMiles® cards have been collected independently by Bankrate. Card details have not been reviewed or approved by the issuer.