Your Credit Card Is Charging You 22%. A Personal Loan Might Only Cost You 12%.

If you’re carrying a balance on a credit card right now, there’s a decent chance you’re paying more than you need to just because of which type of debt it is, not how risky you are as a borrower.

The average personal loan rate sits at 12.16% according to Bankrate’s latest data, and Bankrate’s monitor for well-qualified borrowers puts it closer to 12.28%. Compare that to the average credit card APR, which climbed above 20% this quarter, and the gap is wide enough that it’s worth doing the math even if you’ve never considered a personal loan before.

Why the same person gets two very different rates

It seems strange at first. Same borrower, same credit score, same bank in some cases, and yet a personal loan and a credit card charge wildly different rates for what’s ultimately the same thing: unsecured borrowing. The difference comes down to structure, not risk.

A personal loan is a fixed amount, paid back on a fixed schedule, over a fixed term. The lender knows exactly what they’re getting into and prices accordingly. A credit card is revolving credit with no fixed payoff date, which means the lender is pricing in the possibility that the balance sits there accruing interest indefinitely, sometimes for years. That open-ended risk is a big part of why cards carry a higher rate even for borrowers the bank considers low-risk.

Credit unions tend to be the cheapest source for a personal loan, averaging 10.72% nationally, and they’re legally capped at 18% for federally chartered institutions, so you’ll never see a credit union personal loan touch credit card territory. Commercial banks average closer to 12.06%, and online lenders are the widest range, some as low as 6.20% for excellent credit, others climbing past 30% for weaker credit profiles.

Doing the actual math

Take a $5,000 credit card balance sitting at 22% APR, paid down over three years with fixed monthly payments. Total interest over that period comes out to roughly $1,850. The same $5,000 moved into a personal loan at a typical rate for good credit, somewhere around 13% to 14% for a three-year term, drops the total interest to somewhere near $1,050. That’s about $800 saved, on a fairly modest balance, just by changing the vehicle carrying the debt.

The gap gets more dramatic with a larger balance or a longer card payoff timeline, which is common since minimum payments on cards are structured to stretch repayment out for years if that’s all you pay.

Where this doesn’t work as well

This isn’t a universal fix. A few things change the math:

If your credit has slipped since you opened the card, you might not qualify for a personal loan rate meaningfully below your card’s APR, particularly at online lenders where rates for weaker credit can run as high as 36%. It’s worth getting a prequalified rate quote (most lenders let you check without a hard credit pull) before assuming the swap makes sense.

Origination fees on personal loans, typically 1% to 10% of the loan amount, eat into the savings and need to be factored into the comparison, not just the headline interest rate.

And a personal loan only helps if you actually stop using the card afterward. Moving a balance to a lower-rate loan while continuing to charge the card back up just means carrying two debts instead of one.

The bigger context

None of this is happening in a vacuum. The Fed has left the federal funds rate unchanged since December, and its next scheduled meeting is July 28 to 29, with essentially no expectation of a cut. Personal loan rates have been drifting sideways to slightly higher on shorter terms as a result, though five-year loan rates have actually eased somewhat over the past year. Credit card APRs, tied more directly to the Fed’s benchmark rate, have stayed elevated with no real relief in sight either.

The upshot: neither product is likely to get meaningfully cheaper on its own anytime soon. But the gap between them, roughly eight to ten percentage points for a well-qualified borrower, is real and worth acting on now rather than waiting for the overall rate environment to improve.