Credit card APRs vs. fed funds: the spread that will not mean revert
byu/MonetaryCommentary inbonds
The gap between what banks charge on plastic and the policy rate has turned into a structural toll. It shows credit card APRs that shadow tightening phases but refuse to pass through easing with the same intensity, which lifts the spread over time.
That stickiness reflects unsecured risk capital charges, richer rewards economics funded by revolvers, higher fraud and servicing costs, and market concentration that dilutes competitive pressure.
The result is a double-digit premium over the policy rate that persists across cycles, supports card lenders through late‑cycle credit bumps and taxes liquidity precisely where cash flow is tightest.
Monetary policy now transmits to card borrowers through level effects more than slope effects, so relief for revolvers arrives slowly even when the front end softens.
The spread has become the dominant price in this market, and it is proving stubborn.
