Why are credit card rates so high?
One answer is as close as your television screen. Or your phone, mailbox, computer or car radio. These are all outlets for advertising that helps push credit card rates higher.
In particular, if you watch sporting events, you’re probably used to being interrupted by the likes of Charles Barkley, Spike Lee and Samuel L. Jackson asking what’s in your wallet. Not that they wouldn’t be a fun group to attend a sporting event with. But when their presence comes in the form of credit card ads, it does tend to break up the excitement of game action.
Worse, it’s also costing you money. Those ads don’t come cheap, and according to a March 2025 paper issued by the Federal Reserve Bank of New York, that cost is a factor in why credit card rates are so high. The good news is you don’t have to pay for those ads if you choose not to. There are ways you can avoid the higher interest rates of companies that spend a lot on credit card advertising. The bad news is many consumers don’t make the choice to avoid those costs.
[Read: Best Credit Cards.]
It’s Not Your Imagination — Credit Card Ads Are Everywhere
The Federal Reserve Bank of New York points out that major credit card companies are among the biggest marketers in the world, with advertising budgets rivaling those of consumer product giants such as Coca-Cola and Nike.
Why? One answer is that credit cards are sold differently from many other banking products.
Itamar Drechsler, a professor of finance at the University of Pennsylvania’s Wharton School and one of the authors of that New York Fed paper, says, “Most acquisition of credit card customers happens directly, without a branch, and has for a long time. This helps explain why American Express, which has no branch network, is the biggest spender on marketing.”
This includes those ubiquitous TV ads, but also a variety of other channels. Credit card advertising is placed through the latest algorithm-based online targeting, but also through old-school channels like direct mail.
In fact, Matt Voda, CEO at marketing optimization firm OptiMine, says credit cards rely especially heavily on direct mail:
“Many other market verticals have moved away from direct mail given its high costs, but it is still a critical channel for credit card marketing, which is why most of us get offers every week in our mailbox.”
Beyond direct mail, though, Voda says credit card companies market across several forms of media, which adds up to a high volume of advertisements:
“Most credit card companies are running advertising across 20-30 channels on average and spend tens to hundreds of millions annually as part of these programs.”
Notably, banks that issue credit cards spend much more on marketing than banks that don’t. The New York Fed estimated that as a proportion of a bank’s assets, major banks that offer credit cards typically spend 10 times as much as banks that don’t offer credit cards.
Drechsler says that the economics of this come down to two possible reasons:
“Per dollar of advertising, they (a) acquire more new credit card customers than other banking customers and/or (b) those customers generate more new profits than what they’d get from other banking. Put simply, advertising works better to acquire more credit card customer business than in other areas of commercial banking, and so they spend more on it.”
Interest Rates and Credit Card Advertising
That advertising doesn’t come cheap. Super Bowl ads this year cost as much as a reported $8 million per 30-second spot.
Beyond those high-profile ads, credit card marketers deploy a steady stream of other ads on various types of media channels.
“A credit card company may be willing to invest $500 or more to acquire a new customer. That cost preacquisition amount reflects creative production, but the biggest portion of that investment is in advertising costs,” Voda says.
How do credit card companies recoup this investment in drumming up new customers? According to Drechsler, they seek a payback from “both interest rates and fees, but higher interest rates are the large part.”
Marketing costs are a part of a bank’s operating expenses. The New York Fed found that the greater a bank’s operating expenses, the higher its credit card interest rates tend to be.
“The banks that spend more on operating expenses as a share of balances are able to earn higher interest spreads on borrowers of the same FICO scores,” Drechsler says. “There are some banks that spend a little under 4% of balances on operating expenses, and some that are closer to 7.5%. The latter charge, on average, roughly 2%-2.5% more average interest spread.”
Certainly, there are other factors that go into credit card interest rates. The cost of acquiring capital to use for lending is one. The cost of customers who default on their payments is another. However, the cost of capital is somewhat of a constant across the industry. As for the risk of defaults, companies use similar tactics to account for this, mainly charging higher rates to customers with weaker credit qualifications.
In contrast, as Drechsler points out, there is more variability in how much firms spend on marketing. So, the cost of advertising not only makes rates higher across the industry, but it can also push rates especially high for big-spending firms.
[Read: Starter Credit Cards.]
Consumers Can Blame Themselves
Back to the initial question: Why are credit card rates so high?
Well, you can blast the credit card companies and their ads, but consumers have to shoulder some of the blame. The credit card companies that spend the most on advertising have the largest customer bases and are able to charge higher interest rates.
“The banks are doing what works,” Drechsler says. “The upshot is that because people are responsive to marketing but not that responsive to lower credit card rates, there are a lot of people paying higher interest rates on credit card borrowing.”
Ask yourself this: What do you get out of credit card ads?
Often, those ads present little in the way of information about costs. Instead, the focus is simply on the name recognition that comes from running a memorable ad.
“Brands invest heavily to build brand awareness and favorability such that when the consumer is in the market or a new card at some point in the future, that consumer will have that brand in mind,” Voda says.
In other words, the banks are doing what works — for them. However, choosing a credit card issuer because you remember its ads may not be what works best for you.
[Read: Best Low-Interest Credit Cards.]
Beating the High Cost of Interest Rates and Credit Cards
There are ways you can avoid paying for all that credit card advertising or at least reduce the amount you pay.
Shop Around
Don’t choose a card simply because you remember its commercials. There may be companies that spend less on advertising but can offer lower rates as a result. Do some comparison shopping.
A lot of credit card ads are light on specifics about costs, but there are ways you can easily find that information.
Try a credit card comparison tool. These make information on rates, fees and other terms easily available. Just be aware that the sites themselves may have marketing deals with specific credit card companies, which may impact how the information is presented. This should be disclosed on the page.
The Consumer Financial Protection Bureau collects details from over 150 credit card issuers. The information is available for download on the CFPB’s website. Since it’s only updated every six months, the CFPB data may not be as up to date as what you may find on credit card comparison sites. It’s also not as neatly presented. However, it is objective and comprehensive, making it a great source of data for comparison shopping.
Keep Balances Low
The real key to using credit cards cost effectively is that you only pay interest on the balance you carry. If you pay your balance off in full every month, you shouldn’t have to pay interest. That way, you can avoid paying for credit card ads, no matter how high-priced the talent in the commercial or how much the high-profile placement costs.
There may not be much you can do to prevent an exciting sporting event being interrupted by a credit card ad or to stop having your mailbox stuffed with credit card flyers. However, you should at least be able to avoid paying for those annoyances.
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Those Credit Card Ads Aren’t Just Annoying — They’re Costing You Money originally appeared on usnews.com
