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What is a Good Credit Card APR?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

An annual percentage rate, or APR, is the yearly interest rate you’ll pay if you carry a balance on your credit card from one month to the next. A credit card that offers a 0% introductory APR for an extended period of time is ideal, since you won’t be charged interest during the promotional period. However, a card that offers a lower-than-average APR is still considered “good” — since it can also help you save on interest charges.

Interest rates typically vary based on the type of card, your creditworthiness and the prime rate. This guide explains what a good APR for a credit card is, how to compare interest rates and how to avoid paying interest on your card altogether.

 

What is a good APR?

Anything below the average credit card interest rate — which is 21.40% as of Aug. 2022, according to a LendingTree study — is generally considered a good APR, and anything above that rate is considered high. The best APR is 0%, but that’s only available if the card offers an intro APR on purchases or balance transfers during a promotional period, which could last anywhere from six to 21 months.

The majority of credit cards provide an APR range. For example, the Chase Sapphire Preferred® Card offers a 18.99% - 25.99% Variable APR. Applicants with low bad or fair credit scores will typically be offered higher APRs than those with good or excellent credit. Card issuers may also consider other factors when determining your interest rate, like income, debt obligations and creditworthiness.

Types of credit card APRs

Credit cards can come with several types of APRs. By understanding their differences, you may be able to avoid paying interest charges altogether.

  • Purchase APR. This is the interest rate you’ll be charged for new purchases made on your credit card if you don’t pay your balance in full by the due date each month. Balance transfer APR. When you transfer a balance to a credit card, this interest rate is charged on the transferred amount.
  • Introductory APR. New cardholders may qualify for an introductory APR offer on purchases, balance transfers or both. Depending on the credit card, the intro APR may be as low as 0% and may last anywhere from six to 21 months. Any balance that remains once this promotional period is over will be subject to interest charges at the standard APR.
  • Cash advance APR. The interest you’re charged when you withdraw cash from your credit card’s line of credit is known as the cash advance APR. Because this rate is usually significantly higher than the purchase and balance transfer APRs and because cash advances typically come with an additional fee, we recommend that you avoid this type of transaction.
  • Penalty APR. If you miss a payment or pay late, many credit cards will charge a penalty APR that is higher than standard interest rate. This may also void any introductory APRs on your account and negatively impact your credit score. If you continue to pay late, beware that the penalty rate may be applied to your account indefinitely.

How to compare APRs

APRs can vary vastly. In fact, LendingTree found that minimum APRs started at 12.19% (variable) and maximum APRs topped off at 26.55% (variable) in Aug. 2022. That’s why it’s important to know a credit card’s range before applying.

You can usually find a card’s interest rate by clicking on a link labeled “pricing & terms,” ” rates and fees” or similar wording on a card’s product page from the issuer’s website. Additionally, when you are approved for a card, the issuer will mail a paper copy of the credit card disclosure form along with your card.

The 1968 Truth in Lending Act and Disclosures law requires clear disclosure of key terms for all credit cards. And 1969’s Regulation Z standardized methods for computing the cost of credit and for disclosing credit terms.

Low APR credit cards: What to expect

A low APR credit card is a good choice when you have to carry a balance. Having a lower interest rate means you’ll be charged less interest, making it easier to pay down your balance faster.

The best low APR credit cards are those that have a 0% introductory APR. These no-interest offers may apply to balance transfers, purchases, or both. By law, the minimum 0% intro APR period is six months. Offer periods vary by card, but the longest offers are just under two years. When the introductory period expires, any unpaid balance reverts to the standard rate.

High APR credit cards: What to expect

Many credit cards offer a range of interest rates depending on a customer’s creditworthiness. If your interest rate is towards the high end of that range, your credit score may be below average. Late payments, high utilization, chargeoffs and other negative credit behaviors hurt your credit score.

Also know that credit cards with rewards generally charge more interest than those without. And cards for customers with poor credit charge more interest than cards for people with excellent credit.

For example, the Wells Fargo Active Cash® Card lets cardholders earn unlimited 2% cash rewards on purchases and has a 18.74%, 23.74%, or 28.74% variable APR. While the Capital One Platinum Secured Credit Card, which is designed for those with poor/limited credit, has a 28.49% (variable) APR.

Even if your credit card has a high APR, you can avoid interest charges by paying off your balance in full each month. Only use your credit card for any purchases you know you can pay for. A good habit is paying off your weekly purchases to avoid your balance getting too high.

How to get a good APR

The higher your credit score is, the better your chances are of receiving a lower credit card interest rate. Therefore, it’s important to practice good credit habits, like the following:

  1. Pay on time. Your payment history, which makes up 35% of your total credit score, helps demonstrate to future lenders the likelihood that you will repay your debt. To help avoid missing payments — which can quickly bring down your credit score — you can set up due-date reminders and automatic payments.
  2. Lower your credit utilization ratio. Your credit utilization ratio is the amount of credit you use compared to your total credit limit, which makes up 30% of your credit score. The lower your utilization ratio is, the better your score will be, and most experts recommend keeping this rate below 30%.
  3. Keep no-annual-fee cards open to build your average age of credit. Your length of credit history accounts for 15% of your credit score. This includes how long your credit accounts have been open, how long specific credit accounts have been established and how long it’s been since you used certain accounts. To increase the average length of credit history, avoid closing credit card accounts (especially no-annual-fee card accounts) whenever possible. Also, regularly make small charges on older accounts to prevent the issuer from closing them due to inactivity.
  4. Limit applications for new credit. New credit makes up 10% of your credit score. Each time you apply for a new credit card, mortgage or loan, a hard inquiry appears on your credit score and reduces by a few points. This stays on your credit report for two years, although the negative impact decreases over time. Therefore, it’s best to only apply for new credit when necessary.

You can also get a good APR on your credit card by taking advantage of introductory 0% APRs on purchases or balance transfers. This allows you to pay off a purchase or existing balance without paying interest during the promotional period.

 

How to avoid paying any APR

When you pay your monthly credit card bill in full before the due date, you can avoid paying interest. You can pay in one lump sum or make multiple payments throughout the month.

For cards that are paid in full each month, there is a grace period that avoids interest. The grace period is the time between the statement date and the due date. While credit cards are not required to provide a grace period, most do on purchases.

Other transactions like balance transfers and cash advances do not offer grace periods. To avoid paying interest, only make these transactions if they qualify for a special promotion. For example, a balance transfer credit card may offer a 0% introductory APR for 12 months.

While some people think that carrying a balance on their credit card will help build their credit score, that is incorrect. There is no benefit to carrying a balance from month to month.

Frequently asked questions

A variable APR is a type of interest rate that’s subject to change. Most credit card interest rates are based on the prime rate, which fluctuates when the Federal Reserve changes interest rates.

A decent credit card APR is below the national average interest rate. However, rates vary based on the type of card you have. Credit cards that target consumers with bad credit often have the highest APRs.

Yes, a 24% APR is high for a credit card. While many credit cards offer a range of interest rates, you’ll qualify for lower rates with a higher credit score. Improving your credit score is a simple path to getting lower rates on your credit card.

Yes, an APR of 12% is a good credit card interest rate. However, you should still pay off your balance in full each month to avoid paying interest. If you are carrying a balance, consider a debt consolidation loan or a balance transfer offer.

No, a 26.99% APR is a high interest rate. Credit card interest rates are often based on your creditworthiness. If you’re paying 26.99%, you should work on improving your credit score to qualify for a lower interest rate.

Introductory 0% APR credit card offers change regularly. Currently, the longest intro APR offered on purchases and balance transfers is 0% for 21 months.

 

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