Cardholders with subprime credit ratings continue to grapple with the aftermath, despite the Federal Reserve maintaining steady interest rates.
Rewritten Article
In May, the Federal Reserve held rates steady, pausing from the series of interest rate increases in 2022 that peaked at 5.25% - 5.50% and then tapered down. Despite this pause, credit card rates for many remain sky-high due to the aftermath of pandemic-era rate hikes and the inherently high interest rates associated with unsecured debt.
As of early May 2025, the average credit card interest rate stood at an eye-watering 20.12%, according to our data — a figure that subprime cardholders find even less forgiving given their typically lower credit scores.
When the Federal Reserve raises interest rates, credit card issuers follow suit with APR hikes, causing cardholders to fork out more for borrowed money. Even a Fed rate decrease wouldn't provide much relief for subprime borrowers, who are likely to still deal with extremely high APRs.
The delinquency rate for subprime credit cards has climbed from 15.54% in Q1 2022 to 22.27% as of January 2025. Moreover, tighter lending standards for those with lower scores make it difficult for subprime borrowers to qualify for new cards. With contributing factors such as high inflation and a lingering impact from the pandemic, subprime borrowers are still facing financial headwinds.
Despite these challenges, subprime cardholders can take proactive measures to navigate their financial waters:
- Make at least the minimum monthly payment to avoid racking up interest charges.
- Always pay bills on time, since payment history is the most influential factor in determining a FICO score.
- Use less than 30% of your total available credit to maintain a positive credit utilization score.
- Reduce credit card debt by employing strategies like debt consolidation or balance transfers.
- Regularly review your credit reports and credit scores to stay informed and identify improvements.
- Reach out to your card issuer if you anticipate difficulty making a payment, as they may offer flexible payment arrangements.
- Seek help from a nonprofit credit counseling agency to develop a plan to tackle credit card debt.
Don't let high credit card rates drown you. Take control, and remember, every step towards financial stability is a positive one.
## Enrichment Insights
The current average interest rate for subprime credit cardholders, while not explicitly mentioned in the text, can be inferred to be within the range of 25-30% due to heightened risks for these borrowers and recent rate hikes. This is significantly higher than pre-pandemic levels where average credit card interest rates hovered around 16-17% for all accounts, and subprime rates were somewhat lower. This overall increase in rates reflects both the Federal Reserve’s interest rate hikes and heightened risk assessments by lenders.
- Despite the Federal Reserve's pause in rate increases in 2022, the average credit card interest rate for subprime cardholders in 2025 remains sky-high, possibly within the range of 25-30%.
- Subprime borrowers, who already have lower credit scores, continue to deal with extremely high APRs even when the Federal Reserve decreases interest rates.
- The high inflation and lingering effects of the pandemic create further financial headwinds for subprime borrowers, making proactive personal-finance measures necessary to navigate their situation.
