What is a good APR for a credit card?

When you’re shopping for a new credit card, one of the most important numbers to consider is the APR. A credit card’s APR, or annual percentage rate, is the interest rate that applies to balances you carry past the grace period. The lower your card’s APR, the less interest you’ll pay on your credit card balance.

Even if you plan to pay your statement balance in full each month and avoid interest charges, it can be helpful to know what’s considered a good APR for a credit card. That way, you’ll understand if you’re getting a good deal or if you need to switch to a new credit card to save money on financed purchases.

Credit Card APR Types

Credit cards can have several different APRs, each applied to a different type of balance. Purchases and balance transfers often have the same ongoing APR, while cash advances tend to have a slightly higher APR. If you are more than 60 days late on your credit card payments, a penalty APR may be applied to your credit card balance until you have made six consecutive on-time payments.

You can find the APRs for a credit card listed on the credit card issuer’s website. If you’re looking for the APR on your existing card, you can find it by logging into your account on the issuer’s website or mobile app.

tip

Tip: When researching credit card costs, look for phrases like “Terms and Conditions,” “Fees and Fees,” or “Prices.” These words are typically found in the headings above or in hyperlinks to a card’s APR disclosures.

What is a good annual percentage rate for credit cards?

Credit card APRs tend to increase over time, so what is considered a “good” APR for a credit card also increases. The national average APR for credit cards was 14.65% as of November 2020, according to a January 2021 report from the Federal Reserve. In accounts with an interest rate, the average was 16.28%.

Credit card APRs change as federal interest rates change. Most credit cards have a variable APR, which means the APR is tied to another interest rate and changes based on the underlying rate. For example, many variable APRs are tied to the prime rate, which is the rate that banks lend to their best customers.

Whenever federal interest rates change, so does the prime rate, and credit card interest rates change soon after. Regardless of external rate changes, credit card issuers frequently adjust the price of their credit cards, so your card’s APR could change frequently.

Regardless of what the average credit card APR is at any given time, when it comes to the interest rate on your debt, look for the lowest rate possible. In the end, finding a good APR depends on your credit score and the type of cards you apply for.

It’s rare, but not impossible, to find and qualify for a card with a single-digit APR. These cards may have few if any, advantages besides the low rate. Credit cards offered by credit unions also tend to have lower interest rates, but you must be a member of the credit union to apply.

The types of cards with the highest rates include reward credit cards, store credit cards, and secured credit cards. Issuers tend to charge higher rates on these cards to cover the cost of paying card benefits or recoup losses from people who don’t make payments.

How to qualify for a good credit card interest rate

Credit cards often have a variety of fees. The rate you qualify for depends on your credit score. The most credit-worthy applicants, those with the highest credit scores, generally qualify for the lowest APR a credit card offers. On the other hand, if you have a lower credit score, an issuer may only approve you at a higher rate.

You can see the range of APRs a credit card offers, but you won’t know the exact APR you qualify for until your credit card application is approved. At that time, the credit card issuer will inform you of the terms for which you were approved, including the interest rate and credit limit. You can improve your chances of qualifying for a lower interest rate by improving your credit score.

Credit Card APR Comparison

You can familiarize yourself with a good credit card annual percentage rate (APR) by looking at the terms of several different credit cards and comparing them to each other.

Remember Credit card APR is more important if you plan to carry a balance on your credit card from month to month. Paying your balance in full each month allows you to avoid paying interest altogether, which is a good habit, especially if you can’t qualify for the lower rates. Make sure you don’t spend more than you can afford to make sure you can pay off your balance each month.

While you can avoid interest by paying your balance in full each month, it’s helpful to choose a credit card with a good APR if you need to carry a balance. Making a point to pay off your balances in full saves money on interest and keeps you debt-free.