When you buy a new credit card, one of the most important numbers is the APR. A credit card APR, or APR, is the rate of interest applied to balances you carry outside of the grace period. The lower your card’s APR, the less interest you pay on your credit card balance. Even if you plan on paying your statement balance in full each month and avoiding interest charges, knowing what counts as a good APR for a credit card helps you understand if you’re getting a great deal or if you need to switch to a new credit card to save money on financing your purchase.
Types of APR Credit Cards
Credit cards can have several different APRs, each applying to a different type of balance. Purchases and balance transfers often have the same current APR, while cash advances tend to carry a slightly higher APR. If you are more than 60 days late on a credit card payment, a penalty April may apply to your credit card balance until you make six consecutive payments on time. You can find credit card APRs listed on the credit card issuer’s website. If you are looking for an APR on your existing card, you can find it by logging into your account on the issuer’s website or mobile app.
Advice. When researching the cost of a credit card, look for phrases such as “Terms and Conditions”, “Rates and Fees” or “Pricing”. These words are usually in the headings above or are hyperlinks to APRs card disclosures.
What is a good APR credit card?
Credit card APRs tend to increase over time, so what is considered a “good” APR for a credit card also increases. The national average credit card APR is 15.09%, according to a February report from the Federal Reserve. For accounts that value interest, the average is 16.91%. An APR below the average of 17.57% would be considered a good APR.
Credit card APRs change as federal interest rates change. Most credit cards have a variable APR, which means that the APR is tied to a different interest rate and changes based on the base rate. For example, many APR variables are tied to the base rate. This is the rate that banks provide to their best customers. Whenever federal interest rates change, both the prime rate and credit card interest rates change shortly thereafter. Regardless of external rate changes, credit card issuers frequently adjust their credit card prices, so your card’s APR may change frequently.
No matter what the average credit card cost at any given time, when it comes to the interest rate on your debt, look for the lowest rate. In the end, finding a good APR depends on your credit score and the types of cards you apply for.
It is rare, but not impossible, to find and claim a card with a single-digit APR. These cards may have few if any, perks other than the low level. Credit cards offered by credit unions also tend to have lower interest rates, but you must be a member of a credit union to apply.
Card types with higher rates include rewards credit cards, store credit cards, and secured credit cards. Issuers tend to charge higher rates on these cards to cover the cost of paying benefits on the card or recovering losses from people who don’t make payments.
How to qualify for a good credit card interest rate
Credit cards often come with a range of fees. The level you are eligible for depends on your credit score. The most creditworthy applicants – those with higher credit scores – are usually eligible for the lowest APR that a credit card offers. On the other hand, if you have a lower credit score, the issuer can 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’re eligible for until the credit card application is approved. At the same time, the credit card issuer will notify you of the terms and conditions you have 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.
Comparison of APR credit cards
You can get a feel for a good APR credit card by looking at the terms and conditions of several credit cards and comparing them to each other. Make sure you are looking at the same types of credit cards to get a fair comparison. Compare cash reward credit cards to other cash reward credit cards, travel credit cards to other travel credit cards, and so on.
Keep in mind, that credit card APR matters the most if you plan to keep your credit card balance month after month. Paying the full balance every month allows you to avoid paying interest altogether, which is a good habit, especially if you can’t claim the lowest rates. Make sure you don’t spend more than you can afford to pay the monthly balance.
While you can avoid interest by paying your balance in full every month, it’s a good idea to choose a credit card with a good APR just in case you have to carry a balance. Making a point to pay off your full balances saves money on interest and keeps you out of debt.