The Fed cut rates 1.7 points. Credit card rates dropped less than half as much.

The Federal Reserve began cutting its benchmark rate in September 2024. From its August 2024 level of 5.33 percent, the federal funds rate had fallen 170 basis points to 3.63 percent by August 2026. The average credit card rate — the Federal Reserve's quarterly H.15 series, which reads on different observation dates — fell 82 basis points over a closely overlapping span, from its August 2024 high of 21.76 percent to 20.94 percent in its latest quarterly reading, May 2026 [series TERMCBCCALLNS, FRED]. The resulting gap as of May 2026 — 17.31 percentage points — is the second-widest in the 127 quarterly readings the Federal Reserve has published since it first measured the average credit card rate in November 1994. The record came one quarter earlier: in February 2026, the average card rate of 21.00 percent against a federal funds rate of 3.64 percent produced a spread of 17.36 percentage points. The two most recent quarterly readings are the two widest in the 32-year series. The trajectory ran in reverse on the way up. The Fed raised its benchmark 525 basis points between November 2021 and August 2023, from 0.08 percent to 5.33 percent. Credit card rates rose more over their own cycle — 725 basis points, from 14.51 percent in November 2021 to a 21.76 percent high in August 2024, continuing to climb for about a year after the Fed stopped hiking. Across the full 32-year history of the series, the narrowest spread between the policy rate and the average credit card rate was 7.81 percentage points, recorded in August 2006, when the federal funds rate sat at 5.25 percent and the average card rate was 13.06 percent.

The following is analysis, not fact. Two asymmetries stack here. On the way up, credit card rates rose 725 basis points against the Fed's 525 — 38 percent more, in raw basis-point terms. On the way down, they have moved less than half as far. The result is a spread that hit a 32-year record in February 2026 — 17.36 percentage points — and retreated by only five basis points in the three months that followed. One framework ^sspeculative consistent with this pattern: credit card rates are indexed to the prime rate, which typically moves closely with the federal funds target, but issuers set the margin above prime based on operating costs and credit-risk expectations that do not move one-for-one with the benchmark. During the near-zero-rate period from 2020 to 2022, card rates held in the low-14-percent range despite a near-zero policy rate — consistent with a substantial non-policy-rate component in card pricing ^mmodeled. As benchmark rates rose, issuer margins and other components may also have shifted; over their respective cycles, the card-rate increase was larger in basis-point terms than the federal-funds increase ^mmodeled. On the way down ^sspeculative, the same structural stickiness may operate in reverse: once margins have repriced higher, competitive pressure to lower them may be slower to build than the pressure to raise them when funding costs spike. Credit card delinquency rates reached a 2024 high of 3.22 percent in April and have since declined to 2.85 percent as of April 2026, per FRED series DRCCLACBS. Charge-off rates reached a 2024 high of 4.69 percent in July and now stand at 3.82 percent as of April 2026, per series CORCCACBS. Both remain modestly above their pre-2020 baselines — delinquency ran 2.61 percent in mid-2019 — but the direction in both is down. The direction of travel in the credit-quality data weakens a simple contemporaneous credit-risk explanation for the rate stickiness: the spread has widened to a 32-year record even as the metrics that would justify a risk premium decline from their peaks ^mmodeled.

The strongest counter to the record-spread framing is compositional. The credit card market in 1994 was narrower: fewer subprime and secured-card products existed. Those products often carry rates in the 25-to-30-percent range and pull the all-accounts average upward regardless of the policy rate ^sspeculative. Part of the widened spread ^sspeculative may reflect structural expansion of credit access over three decades — more people with credit cards, more of them at the higher-rate end of the market — rather than a change in what any individual borrower type is paying. A methodological limit also applies to the comparison: the H.15 series tracks the average rate across all credit card accounts, including those carrying a zero balance at the statement date, where the stated APR costs the holder nothing that billing cycle. Borrowers who actually revolve a balance can face a materially higher effective rate than the all-accounts average captures. The spread calculation here may therefore be conservative relative to the experience of revolving borrowers ^mmodeled.