Image source: The Motley Fool/Getty Images

Credit card interest rates are variable, which means they fluctuate depending on economic conditions and, most importantly, interest rate decisions made by the Federal Reserve.

When inflation skyrocketed, the Federal Reserve hiked its benchmark interest rate 11 times to get it under control.

Unfortunately, that sent credit card annual percentage rates (APRs) soaring from about 17.9% in 2022 to their current level of 22.76%.

But with the Fed recently slashing its rate by half a percentage point and more cuts likely on the way, what does that mean for credit card interest rates in 2025? Let’s take a look.

Where credit card interest rates could be in 2025

The good news is that the Fed’s recent rate cut decision directly affects credit card rates. That’s because credit card APRs are determined based on what’s called the prime rate, which is affected by the federal funds rate set by the Federal Reserve.

In short, when the Fed raises the federal funds rate, the prime rate goes up, and credit card APRs increase. When it cuts rates, credit card interest rates eventually come down. Based on this, we can make some loose assumptions.

Many economists predict the Fed will lower interest rates by another half percentage point (in addition to the recent half-percentage-point cut in September) by the end of the year and make a series of small cuts equaling 1 percentage point through 2025.

This means the average credit card interest rate could slide to about 21.7% by the end of this year and fall to about 20.7% by the end of 2025.

This is just my prediction, of course, and it’s worth mentioning that any shift in economic conditions could change what the Fed does moving forward.

Why credit card rates are hard to nail down

Since credit card rates are variable, there isn’t a specific percentage that we can know for sure they’ll be set to.

It’s also important to note that your credit history and your credit score determine your specific credit card APR.

Credit cards with lower rates and great perks often require higher credit scores. Click here to learn more about the best credit cards on our radar.

It’s worth reaching a credit score of 750 or higher if you’re trying to get the best rates on credit cards and other loans. That’s an above-average credit score, which tells lenders you’ll likely be a low-risk borrower.

Don’t wait for rates to fall

To improve your credit score, focus on making loan payments on time and using very little of your available credit. A credit utilization rate under 30% is good, and under 10% is even better. It’s also a good idea to keep old accounts open so you have a long credit history to show lenders.

Paying off your high-interest credit card debt is one of the best ways to improve your financial situation and credit score. For example, if you owe $1,000 on a credit card that has a 22.7% APR, it will take you one year to pay it off if your monthly payments are $94. But if you increase your payments to $150 per month, it’ll take just seven months.

You might also want to consider a balance transfer card, some of which have a 0% intro APR for a period of 15 months or longer. Check out the best balance transfer cards here.

While the Federal Reserve will likely continue cutting interest rates, you shouldn’t wait for this to happen. You can improve your financial situation now by working on your credit score and throwing any extra income you have toward your credit card balance.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.