A credit card’s APR, or annual percentage rate, determines the amount of interest the card issuer can charge on an outstanding balance on your credit card.
You are only charged APR if you carry a balance month-to-month instead of paying it off in full each payment due date, but a lower rate means you’ll accrue less interest on any balance. There are many different types of credit card APRs, but the one to be most interested in is the “purchase APR,” or the interest rate you pay on purchases.
All credit cards have an APR range, but what you’re actually offered depends on your credit score, history, and other factors.
Read on to learn more about:
What is a good APR for a credit card?
Technically, the best APR you can get on a credit card is 0%, but it’s only 0% for a short time. These cards offer an introductory period where they don’t charge interest on your purchases, even if you carry a balance from month to month. This period often lasts 12-24 months but can vary by card. The “catch” is once the introductory period is over, outstanding balances will be charged interest (likely at a higher rate).
Generally, if the APR is below the national average, it’s considered “good.” Over the past several months, the average credit card interest rate has been steadily increasing and it now sits at 20.92% (according to Federal Reserve Data from Q1 2023).
However, “good” also depends on the type of credit card you’re looking at and your own credit. Consumers with a poor credit score will likely only qualify for higher interest rates compared to those with good or excellent credit. This means a “good APR” may be different for someone with bad credit vs. someone with excellent credit.
Even cards at the national average are ok, but definitely try to avoid credit cards with APRs higher than the national average. If you carry a balance on your card and have a high APR, you’ll be paying a lot more in interest.
How a credit card APR is determined?
Your credit card’s APR can depend on a number of factors such as:
- The card’s interest range. Each card issuer has a different range or tier of potential rates offered.
- Your creditworthiness. Built on your credit score and history, the better your score, the more likely you’ll qualify for a lower APR.
- Benchmark interest rates. Most cards have variable interest rates, meaning the rate can increase or decrease as the benchmark rate changes. (If the Federal Reserve continues raising interest rates, the average APR may increase because credit card interest rates are often based on a benchmark rate correlated with the federal funds rate.)
- The type of transaction. Purchases, balance transfers, and cash advances may all have different APRs. You may also have a penalty APR for late payments.
How to compare credit card APRs?
- Consider the national APR average. If the credit card’s APR is lower than the average, you can probably consider it good.
- Compare each card’s range. You may find some cards with an APR as low as 13.99% or lower, or other cards with a range up to 35.99%. There’s no federal law that states a cut-off for APR, so it will depend on the card issuer. Where you fall in that range depends on your creditworthiness.
- Check for an introductory APR on purchases and/or balance transfers. Cards that offer these will have 0% APR for a certain period of time, and then after the introductory period is over, you’ll be charged a full APR on outstanding balances.
- Be aware of any penalty APR that may be applied if you miss a credit card payment.
- The type of credit card can also dictate APR. For example, rewards credit cards likely have higher APRs (or higher APR range) than a standard card.
- Note different APRs for different transactions. Some cards have different APRs on the same card for purchases, balance transfers, and cash advances. You’ll find this information in the card’s terms and conditions.
What to expect from credit cards with low APRs?
To get a low APR on a good credit card, you need a good credit score (690 or higher) in order to qualify.
If you tend to carry a balance from month to month, are planning a large purchase, or are transferring existing high-interest debt to the card, one with a low APR will save you money on interest. Especially consider a 0% introductory APR, the most ideal for paying down transferred debt or financing a large purchase.
For the best low-interest credit cards, also consider a card from a credit union.
However, know that credit cards with low APRs typically don’t have all of the rewards, benefits, and perks other cards might have. Some of these cards are even secured cards, meaning you have to put down a deposit in order to be approved. Weigh whether the money you’ll save in interest accrued may be worth the lack of additional benefits.
What to expect from credit cards with high APRs?
The highest credit card interest rates are usually found on:
- Rewards cards
- Cash back cards
- Store cards
- Cards for bad credit
- Secured cards
Rewards and cash back cards are most attractive because they typically offer rewards, perks, benefits, or discounts, but it’s important to try to pay off your balance in full each month to avoid the high-interest charges.
If you have poor credit, you may still have higher APRs regardless of which type of card you apply for.
Note that if you have good to excellent credit, you may still qualify for lower APRs with these types of cards.
How to qualify for a card with a good APR?
The best way to qualify for a card with a good APR is by having a good to excellent credit score. You can do this by practicing responsible financial and credit habits such as:
- Review your credit score and report often.
- Your payment history makes up 35% of your credit score, so make sure you’re making all of your credit card and loan payments on time.
- Keep your credit utilization low by avoiding maxing out your credit cards and only using the credit you need. It’s recommended not to use more than 30% of your available credit.
- Try to pay off your balance in full each month, or at least as much as you can.
- Keep other credit cards open and active with small purchases as this can help you build your credit history.
- Avoid applying for multiple credit cards at one time. Ideally, wait six months between credit applications.
The better your credit score, the lower the APR you’ll qualify for. As your score improves, you may have access to better credit cards and interest rates.
You may be able to negotiate a lower APR directly with a bank if you can show you make timely payments and your credit score has increased since your time as a customer.
No – if you pay on time and in full, meaning you don’t carry a balance from month to month, you will not be charged APR/interest.
As long as you maintain responsible financial habits, like paying your card off on time and keeping your credit utilization low, a high APR card can help boost your credit score.
This depends on the type of card you’re applying for and whether you have any credit built at all, but a good APR may be as low as 18%.