Credit card interest soars to a historic 19.04%

By Rob

The cost of owing money on credit cards is now the highest in more than 30 years.

According to survey data from the financial services company Bankrate.com,

"Bankrate has been studying credit card rates since 1985, and this figure dwarfs the previous all-time high of 19.00% recorded in July 1991," Bankrate chief financial analyst Greg McBride wrote on Wednesday.

It is the highest increase in credit card interest rates in the last 30 years.

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The historic rise coincides with the Federal Reserve raising interest rates to a level not seen in more than a decade, as the Fed battles rising inflation.

Rising federal funds interest rates raise what is known as the prime rate.

It currently stands at 7%.

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The annual interest rates of credit cards are determined by the prime interest rate, plus the margin of a bank to lend money to a given client.

The new average represents a substantial increase over the average credit card interest rate seen at the beginning of the year: 16.3%.

According to Bankrate, for someone with

, making just the minimum payment each month would cost $5,517 in interest over 185 months, or about 15 years. .

At the current rate of 19.04%, individuals would pay $6,546.

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"You don't feel as much month to month, but

," said Bankrate's principal sector analyst Ted Rossman. 

"If you, as an individual, have credit card debt with an interest rate close to 20%, this has to be a priority: it's three, four, five times higher than other forms of debt," he added.

However, while accumulating large credit card balances can eventually affect

, and the total amount of all credit card balances in the United States remains at record levels, delinquencies remain low, according to Rossman.

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"Consumer confidence is low,

, but they keep (paying)," he said.

"Maybe it's the excess savings built up during the pandemic. I also think the job market is stronger than people think."

While salaries are in most cases not keeping pace with inflation, he said, banks are talking about a return to 2019 levels for delinquencies and defaults.

[US Credit Card Debt Reaches $890 Billion]

"

on a large scale," Rossman said.