Maximum credit card interest rate by law
Unless you're taking advantage of a 0% promotional offer, all credit cards charge interest on balances carried over month to month. For this reason, it's important that you understand how the interest rates on your credit card work. This includes the amount of interest you're charged and the laws surrounding credit card interest.
At the federal level, there are no usury laws limiting the amount of interest a credit card company can charge borrowers. However, the federal government protects consumers from unfair practices by credit card companies under the Credit Card Accountability, Responsibility and Disclosure Act of 2009.
In this article, we'll explore the maximum interest rates allowed by law, how these rates can differ based on state and how to avoid high interest on credit cards and loans.
What is a usury law?
Usury is the practice of charging consumers unreasonable interest rates on financial products. A usury law caps the maximum interest rate on different kinds of loans, including credit cards.
The lack of usury laws at the federal level means that maximum interest rates will vary depending on the usury laws in each state. In fact, national banks must adhere to the maximum interest rates in the bank's home state, not the cardholder's. That means the rates charged to cardholders can be higher than their state allows.
For example, a person living in California who has a loan from a New York-based bank can be charged up to 16% interest (the maximum rate in New York), even though the interest rate limit for California-based banks is 10%.
It's important to note that most national banks and credit card companies can avoid state usury laws by incorporating in jurisdictions with relaxed usury laws, like Delaware, even though they may operate elsewhere.
Related: How to use a 0% APR credit card as an interest-free loan
Maximum interest rates in your state
Many states set different maximum interest rates for small loans. For example, in California, the maximum interest rate on a $500 loan with a six-month repayment term is 45%, whereas a $2,000 loan with a two-year repayment term has a maximum interest rate of 25%.
These rate differences are illustrated in the National Consumer Law Center's list of state rate caps for $500 and $2,000 loans.
Related: Best balance transfer credit cards
About the Military Lending Act
There is one exception to the state-by-state maximum interest rate and the lack of federal laws on interest rates: the Military Lending Act.
The MLA overrides state laws on maximum interest rates and applies to active-duty military members, including their dependents. The maximum interest rate allowed by law for those within the MLA is capped at a 36% annual percentage rate.
The types of financial products covered under the MLA include payday loans, credit cards, overdraft lines of credit and some installment loans.
How to avoid high interest rates
High interest rates can be detrimental to personal finances and make it harder to pay off debt. However, there are several ways to avoid them, some more advantageous than others.
Start by talking to your credit card issuer or bank to negotiate a lower rate. Loan or credit card APRs are partly based on credit score, so if your credit score has improved since you took out the loan or applied for a credit card, you may qualify for a lower interest rate.
If the rate cannot be adjusted, consider transferring the outstanding balance to a 0% APR credit card. If you're carrying debt across several high-interest loans or credit cards, you may want to consider taking out a debt consolidation loan. In addition to a potentially lower interest rate, you will only have to deal with a single payment.
Related: How to check your credit score for free
Bottom line
While there are no federal usury laws in the U.S., state usury laws can prevent outrageous interest rates on loans and credit cards. That doesn't mean that the credit card you hold will fall within your state's maximum interest rates, though; many national banks and credit card companies take advantage of various exemptions that allow them to set higher rates.
Thankfully, there are steps you can take to avoid high interest rates, including balance transfers and debt consolidation loans. Ultimately, the best step method is not to carry a balance and to pay off your credit card or loan as soon as possible.
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.