Despite High Interest Rates, 60% of Credit Card Users Carry a Balance From One Month to the Next

Times are tough for the American consumer. The stock market slumped during the first three months of 2025. One major index, the S&P 500, posted its worst quarter since 2022. And the chances of it making a rapid recovery appear to dwindle by the day. 

Consumer sentiment has also been waning in the early portions of the year. The University of Michigan’s Index of Consumer Sentiment fell in March, representing a drop of more than 28% from sentiment figures posted in March 2024.

The rising cost of goods and services can put a damper on a consumer’s financial outlook. The bird flu has wreaked havoc on the egg market in recent months, bringing the average cost of a dozen eggs to $5.18. In 2018, you could buy a dozen eggs for just $1.49. 

That’s caused more than 30% of the country to stop buying eggs altogether, while 11 million U.S. households try to obtain them the old-fashioned way — by raising chickens in their backyard. In 2018, only 5.8 million households had backyard chickens.

Credit cards make life easier for consumers in numerous ways. Those who are short on cash can use their credit cards to buy goods today and pay for them later. 

A recent report from the Federal Reserve Bank of New York reveals that 74% of adults in the U.S. have at least one credit card, and credit card payments account for 70% of the spending in the retail sector.

But cardholders can get into financial trouble when they don’t pay their credit card balances off by their due date, incurring steep interest rate charges. 

The Fed report finds that 60% of credit card accounts carry a balance from one billing period to the next, despite the fact that card interest rates currently average 23%. The report notes that current credit card interest rates are “far exceeding the rates on any other major type of loan or bond.”

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” CardRates.com expert Erica Sandberg told CNBC. “The more a debt costs, the more stress this puts on an already tight budget.”

With the majority of cardholders carrying balances from one month to the next, issuers need to stay abreast of any factors that could potentially damage their ability to collect on interest rate fees.

Legislators in both the U.S. Senate and the House of Representatives have proposed capping card interest rates at 10%, which would drastically reduce the amount of revenue issuers could collect from interest rate charges. Some suggest that proposed caps on interest rates are unlikely to move forward anytime soon. 

But issuers would be wise to formulate strategies they can employ to protect revenues should a 10% interest rate cap become law. Because the first few months of 2025 have reinforced the notion that just because an event is unlikely to occur, that doesn’t mean it won’t.