What Is a Good APR for a Credit Card?

Credit cards streamline the process of financing anything, from basic needs in difficult times to the finer things in life that you might need help paying for upfront. They can also offer stellar cashback rewards and welcome bonuses and help you boost your credit score along the way

The main downside to credit cards is the same as with all other types of personal loans and lines of credit – interest charges. In the guide below, we’ll discuss what’s considered a good APR for a credit card and give you tips for securing the lowest rate possible on your next card.

What Is APR on a Credit Card?

The Annual Percentage Rate (APR) is the fee that lenders charge when you borrow money. APR reflects the cost of the funds borrowed annually, however, in the case of credit cards, it’s applied over a significantly shorter period of time.

The APR on your credit card balance is carried forward from month to month, and it usually works out to be higher than interest rates charged on other forms of credit like personal or auto loans.

When looking into applying for a credit card, you need to evaluate your options carefully by comparing APRs and other fees. The information is usually available on the bank or credit union’s website. However, actual rates may vary depending on your credit rating.

What Is a Good Credit Card APR?

Any credit card with an APR below the average interest rate at the time is considered to be a good credit card APR. Establish the current average interest rate before comparing credit card APRs to get an accurate baseline.

For example, the national average credit card APR in 2016 was 12.35%. According to Federal Reserve data, the average credit card APR in Q3 of 2023 rose to 21.19%.

APR can vary by applicant depending on their creditworthiness. The average is only there as a general guideline. Also, keep in mind that some credit card issuers charge annual fees on credit cards, so be sure to read the fine print.

How Is Credit Card APR Determined?

Credit card issuers determine the APR offered on cards based on different criteria. Many banks and credit unions offer credit cards with varying APR ranges to meet the needs of their customers instead of adopting a one-size-fits-all approach.

Rewards credit cards that give cash back usually come with a high APR as they offer more value to the cardholder. However, they aren’t always available to people with bad credit. Similarly, credit cards designed for people with lower credit scores typically come with higher APRs.

Most lenders require a full credit report and dive into your past payment history on other credit cards and personal loans before approving your credit or defining your APR. Current debt-to-income ratios are assessed too, so having an excellent credit score alone will not guarantee a low APR.

Low APR vs Other Perks

Low APR isn’t the only factor to consider as you compare credit card offers. Some banks and credit unions offer perks that may tip the scale when choosing a credit card.

Some financial institutions like Citi or American Express extend introductory offers with low intro APR or even 0% APR for a fixed period of time, which then converts to a variable APR. Other credit cards offer fixed or variable APRs from the get-go.

Unfortunately, credit cards for people with bad credit usually come with higher APRs or require a down payment in case payments default.

If you intend to pay off your balance as soon as you receive your statement, it might make more sense for you to opt for a rewards credit card instead of a regular new credit card with a low APR.

The best rewards credit card offers cashback on every dollar spent through credit utilization, travel miles, or points that you may redeem later. However, these cards may come with a higher APR. The higher APR won’t affect you financially if you settle the balance due before the monthly billing cycle ends.

How to Compare Credit Card APR

Scoping out the lowest credit card interest rate possible is the best way to ensure you’re not paying too much interest on your monthly balance. Here are a few more tips to help you with the comparison process:

  • Identify the Types of APR: Recognize the different types of APR that credit cards may have, such as introductory, purchase, balance transfer, and cash advance APRs. Each type serves a specific purpose and can impact your overall cost.
  • Compare introductory APR offers: Look for credit cards that offer a 0% introductory APR for a certain period. Compare the duration of the introductory period and consider how it aligns with your credit card habits.
  • Evaluate ongoing APR: Assess the ongoing APR that applies after the introductory period ends. This rate will determine the long-term cost of carrying a balance on the credit card.
  • Consider additional fees: Take additional fees that may affect the overall cost of the credit card into account, such as annual fees, late payment fees, and foreign transaction fees.
  • Utilize comparison tools: Utilize online comparison tools and websites to compare the APRs of different credit cards. These resources can provide a comprehensive overview of various credit card offers.
  • Read the fine print: Carefully review the terms and conditions of each credit card to ensure that you fully understand how the APR is applied and any factors that may impact it.

Types of Credit Card APR

Credit card companies offer a range of credit cards with varying APR rates to suit every potential customer’s needs.

Before applying for a new credit card and committing to a particular financial institution, thoroughly read the terms and conditions. Having a basic understanding of the different APR offers will help you evaluate which credit card option might be best for you.

Here’s a breakdown of the most widely available types of APR:

  • Fixed APR: Fixed APR isn’t very common. This type of APR is locked in when you sign up for your credit card and remains fixed until you cancel your account. Some financial institutions and banks might penalize you for falling behind on payments by temporarily increasing your rate.
  • Variable APR: The most standard APR rate available, Variable APR increases or decreases based on a pre-set benchmark rate, usually the current prime rate plus a set percentage (for example, the prime rate plus 4%). The prime rate fluctuates constantly, so your variable purchase APR will, too.
  • Introductory APR: Introductory APR is a heavily discounted promotional rate usually offered for a limited period to attract new customers. Once the promotional or introductory offer has expired, customers’ APR will usually increase to a regular variable rate depending on their credit rating.
  • Balance transfer APR: Moving your debt from a card account with a high APR rate to a different card account with a lower interest rate could be a smart way to lower your debt. Some banks and credit unions apply a balance transfer fee, so read your credit card’s terms and conditions before transferring from one credit card account to a balance transfer credit card.
  • Cash advance APR: The APR rate applied to cash advances or withdrawals from ATMs or bank branches is usually extremely high. It’s in your best interest to forgo dipping into any cash advances through your credit card as much as possible to avoid paying the hefty APR rates that come with it.
  • Penalty APR: Some banks and credit unions have set balance repayment timeframes. Should you fall behind on payments or forget to make the transfer on time, you will likely be made to pay a penalty APR. The rate may vary depending on how late the payment is and the terms and conditions set by your card provider.

How to Get a Better Credit Card APR

Here are a few surefire strategies to unlock lower credit card APR offers.

1. Improve Your Credit Score

The most significant factor that influences APR is a bad credit score. Fortunately, credit ratings aren’t permanent, and there are plenty of things you can do to improve your score and get better rates or perks down the line.

Credit scores are based on your previous payment history patterns, current debts, the length of your credit history, and other variables.

2. Understand Your Level of Risk

Look into your accounts to better understand what makes lenders consider you a high-risk borrower. You can monitor your credit reports year-round with a service like Credit Karma. For a more in-depth look, you can access a free copy of your full credit reports from AnnualCreditReport.com every 12 months.

3. Make Sure Your Credit Reports Are Accurate

Credit report agencies collect information from financial institutions to compile credit reports. The data collection system is not perfect, and there’s always a chance that errors on your FICO report could negatively impact your credit score. If you find any mistakes in your report, file a dispute with the credit agency and contact the financial institution related to the error.

4. Settle Debts and Bills on Time

Paying your bills late due to negligence or bad financial planning has a huge impact on your overall credit score.

Setting up auto-pay for recurring loans or bills and processing individual payments will greatly impact your credit score in the long run.

5. Keep Your Total Debt In Check

The amount of debt you have across multiple lenders significantly impacts your credit score, so you should always keep it under control. You’ll find a reference to your credit utilization ratio on your credit reports.

If you’re taking on credit card debt with other lenders because your credit limit restricts you, it might be beneficial to speak to your lender to increase your credit limit rather than going to a new lender.

How to Avoid Paying APR

Optimizing the way you use your credit cards to avoid paying interest is your best plan of action for your personal finances. Since your credit score doesn’t improve by carrying balances forward, you might as well avoid paying interest and settle pending balances in full before their due date.

Paying your statements off ahead of time will also help you maintain your credit score. Here are some tips to avoid paying interest on your credit cards:

1. Make a Budget and Stick to It

Set strict spending boundaries for yourself and plan for large purchases ahead of time to avoid relying on credit card accounts as much as possible.

Budgets should designate funds for all your fixed monthly payments like mortgage payments, rent, and bills, along with a buffer for expenses that may crop up. Hold yourself accountable and track your expenses to keep your spending in check.

2. Treat Your Credit Card Like a Debit Card

Since credit cards aren’t directly linked to checking accounts, it’s easy to lose track of your spending. Make an effort to reflect on how much you’re spending to ensure you keep your pending credit card balance within a range that you can pay off when you need to.

3. Pay Off Your Balances in Advance

The best way to avoid paying interest to credit card companies is to settle your outstanding payments before the due date lapses and interest is due. You may consider developing the habit of settling your balance as soon as you receive your credit card statement.

Alternatively, you could pay off smaller amounts over the month to make sure you cover the balance while the statement is still open.

4. Consider Automating Payments

Another viable option could be setting up automatic payments from your checking account to completely avoid the hassle of paying off your credit card bill. Always ensure that you have enough cash in your checking account to cover the balance, or you’ll risk incurring charges when the automatic transfer goes through.

Interest payments may seem insignificant on a month-to-month basis. But they add up in the long run, making it more difficult for you to pay off the balance on your credit card down the line.

Checking your credit card statements carefully before paying off your outstanding balance will help you immediately notice any fraudulent charges.

Frequently Asked Questions

What is an acceptable credit card APR?

Any APR below the current average is considered good. Do some research to find out the current average APR to see how your offer measures up before accepting a rate from your lender.

If you have an existing credit card with a higher APR than what you can get elsewhere, it might be time to give your credit card issuer a call to renegotiate your APR.

Can I negotiate my APR rate?

You can negotiate for a lower APR rate on your credit card by contacting your card issuer. For the best results, make sure your credit is in good standing and remind the representative you speak with of your responsible card use.

You can also disclose that you’re comparing other card offers and considering a balance transfer, or propose that they match the rate of another card.

Is an APR of 24.99% good?

An APR of 24.99% is a reasonably average rate for a personal loan or credit card if you have poor credit. However, it’s a bit higher than average. You might want to look into improving your credit score or contacting your credit card issuer to try to obtain a better APR.

Where can I find my credit card’s APR?

You can find your credit card’s interest rate APR in the places below:

  • Monthly statement: Credit card statements typically have a section that breaks down the interest on your balance.
  • Terms and conditions: Look at your financial institution’s website or your original credit card enrollment paperwork to find your APR.
  • Contact your financial institution: If you can’t find your APR, reach out to your bank or credit union to formally request the agreed APR on your credit card.

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