This Was the Average Credit Card APR in 2023 -- and What It Might Cost You

Credit card companies don't allow consumers to rack up balances and pay them off over time out of the goodness of their hearts. Rather, credit card companies make money off of the interest customers pay. And depending on your specific credit cards, that interest could be substantial.

Over the past 10 years, the average APR on credit cards almost doubled from 12.9% in late 2013 to 22.8% in 2023, according to the Consumer Financial Protection Bureau. If you owe money on a credit card with an APR like that, you may be shocked at what it costs you in interest.

You could end up spending quite a bundle

It's easy to see why you might end up with a credit card balance you can't cover in full. Your car might break down at a time when your hours at work (and paycheck) have been reduced and you don't have emergency savings to cover an unplanned bill. 

In that situation, the bill in question might have to go on your credit card. Then, another bill might have to go on another credit card a few months later when your paycheck can't handle it.

The problem, though, is that credit card companies are notorious for charging large amounts of interest on carried balances. And so over time, the amount of money you lose to interest could be significant.

Let's say you owe $10,000 on a single credit card with an APR of 22.8%. If it takes you five years to pay that balance off, you're looking at losing over $6,800 to interest charges alone. That's more than two-thirds of the initial balance you racked up.

That's why it's best to do what you can to avoid credit card debt. And one good way is to make sure you have a well-stocked emergency fund. But if you've already missed that boat and are loaded up with credit card debt, there's another tactic you may want to employ.

Set yourself up to accrue less interest on your debt

When your credit card charges you an exorbitant interest rate, it's hard to dig your way out of that hole. So if you owe money on your credit cards, one thing you may want to consider is consolidating your debt into a fixed-rate personal loan. You're likely to be looking at a much lower interest rate on a personal loan than a credit card balance, though the rate you qualify for will depend on factors such as your credit score.

In fact, let's say you sign a five-year, $10,000 personal loan at 10%. If you make your payments on time, you'll accrue about $2,750 in interest. That's not a negligible sum. But it's also nowhere close to the amount of interest you'd be paying at 22.8%.

If you're going to put expenses on your credit cards, your best bet is to try to pay your balances in full each month. And if you're faced with an emergency expense, consider taking out a fixed-rate loan to cover it before turning to a credit card or two. You may find that going this route costs you a lot less money all in.