Steep Interest Rates Continue to Burden Subprime Credit Card Holders Despite Fed Pause
Despite the Federal Reserve maintaining steady rates in early 2025, subprime credit card holders continue to face significant financial challenges. The average credit card interest rate stands at 20.09 percent as of mid-March 2025, following a series of rate adjustments that began in March 2022.
Woman reviewing credit card documents
Current State of Credit Card Rates
The Fed's target rate currently sits at 4.25 to 4.50 percent after three rate cuts in 2024. However, credit card rates remain near historic highs, particularly affecting subprime borrowers - those with FICO scores below 619.
Impact on Subprime Borrowers
Delinquency rates for subprime borrowers increased to 15.68 percent in Q3 2023, up from 11.12 percent in Q1 2022. Total credit card debt reached $1.21 trillion in Q4 2024, reflecting a $45 billion increase.
Key Challenges:
- Higher interest charges on existing balances
- Difficulty qualifying for new cards
- Limited access to debt consolidation options
- Increased cost of everyday essentials
Essential Steps for Subprime Borrowers:
- Make at least minimum monthly payments
- Pay bills on time to improve credit score
- Keep credit utilization below 30 percent
- Work on reducing existing credit card debt
- Monitor credit reports regularly
- Communicate with card issuers about payment difficulties
- Seek assistance from nonprofit credit counseling agencies
While recent Fed rate cuts offer some relief, subprime cardholders should focus on debt management and credit improvement strategies to navigate these challenging financial conditions.