Credit card interest rates are ‘the highest they’ve ever been’: Analyst

LendingTree Chief Credit Analyst Matt Schulz joins Yahoo Finance Live to discuss rising credit card rates, Fed policy, credit card debt, and the outlook for card holders.

Video transcript

AKIKO FUJITA: Credit card rates are reaching new highs. And whenever the Fed raises rates, card issuers typically pass those higher rates on to customers usually within a month or two. Given that, the Fed will almost certainly continue to do so several times in coming months. Credit card rates are likely to go well higher than the record rates we're seeing today.

For more on the rise in credit card rates, let's bring in Matt Schulz, LendingTree chief credit analyst. Matt, it's good to talk to you today. I'm going to admit one thing here because I felt the pinch recently when I missed a credit card payment for the first time in years. Completely overlooked it. And I was just talking to Brian about how high that payment was. What are you seeing right now?

MATT SCHULZ: Yeah, credit card interest rates are basically the highest they've ever been. I've been watching credit card rates on a monthly basis for more than a decade now. And it's the highest that they've been since I've been tracking them. The latest data from LendingTree showed that the average APR on a new credit card offer is a little over 20%. And it's the first time that we've seen that threshold passed since we've started tracking it at LendingTree in 2018. But in reality, the likelihood is that this is the highest that credit card rates have ever been. But the troubling truth is that we're nowhere near where the top is going to be.

BRIAN CHEUNG: Matt, it's Brian Cheung here. So I guess the natural question is, the Fed is doing this to try to disincentivize people from spending as much as they've been in this post-pandemic period. So are you seeing, alongside this rise in the credit card interest rates, a decrease in the balances that people have on their credit cards?

MATT SCHULZ: Not yet. It's understandable to think that that may come down the line. But what we're seeing right now is actually card debt increasing. And the trouble is that, historically, that's what credit card debt does. The only time that we've seen real meaningful decreases in credit card debt since the Fed began tracking credit card debt back in the '60s is in times of great economic crisis, like the Great Recession, like the very beginning of the pandemic. Other than that, credit card debt just rises. And that's where we are again. And we're likely to see credit card debt hit record rates later this year, or certainly sometime next.

AKIKO FUJITA: So there's a lot of people who are going to be watching this who say, well, what can I do specifically in this scenario? Two things you point out. Take advantage of those balance transfer offers that are out there, but also call the credit card companies directly to see if you can bring the rates down. How successful is that?

MATT SCHULZ: More successful than people would imagine. About 70% of people who we asked in a LendingTree poll in April, who had asked for a lower interest rate on their credit card in the past year, were successful. And that's a really high number. And it indicates that it's not just people with 800 credit scores who are getting their way.

And the good news is that that number has actually been really high, and even higher than that 70% number, for several years now. So it really is worth picking up the phone and making that call because the average reduction that people reported was seven percentage points. That's a really significant decrease. So it's absolutely worth your time.