ICYMI: New Research Explores the Rise in Credit Card APR Spreads in Recent Years

WASHINGTON, D.C. – A new white paper from Dr. Paul Calem – in coordination with the Consumer Bankers Association (CBA) – examines the growth of average credit card annual percentage rates (APRs) as compared to underlying the Fed Funds Rate.

The analysis highlights increased consumer demand for cards with higher credit limits; resulting regulatory requirements; and changing macroeconomic conditions.

Why It Matters

This analysis indicates that recent rate movements are consistent with broader market trends and evolving credit risk rather than market power or non-competitive behavior.

Key Findings

The paper discusses the factors underlying the rising spread including:

• Worsening credit risk, tied to macroeconomic conditions;
• Expanded underwriting during and after the final quarter of 2020;
• Increasing projected loss rates from regulatory stress tests; and
• Shifting consumer demand toward higher rate cards with larger limits.

Dive Deeper

To read the white paper, click HERE.