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 applied to balances you carry beyond the grace period. The lower your card’s APR, the less interest you pay on your credit card balance.
Even if you plan to pay your statement balance in full every month and avoid interest charges, knowing what’s considered a good APR for a credit card can be helpful. That way, you understand whether you’re getting a good deal or whether you need to switch to a new credit card to save money on financed purchases.
Types of Credit Card APRs
Credit cards may 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 carry a slightly higher APR. If you’re late on your credit card payments by more than 60 days, a penalty APR may apply to your credit card balance until you’ve made six consecutive payments on time.
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: When researching credit card costs, look for phrases such as “Terms and Conditions,” “Rates and Fees,” or “Pricing.” These words are usually in headings above or hyperlinks to disclosures about a card’s APRs.
What’s a Good Credit Card APR?
Credit card APRs tend to rise over time, so what counts as a “good” APR for a credit card also increases. The national average credit card APR was 14.65% in November 2020, according to a January 2021 report from the Federal Reserve. On accounts assessing interest, 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 shortly after. Independent of external rate changes, credit card issuers frequently adjust their credit card pricing, so your card’s APR could change often.
Regardless of what the average credit card APR is at any given time, when it comes to the interest rate on your debt, seek out the lowest rate possible. In the end, finding a good APR depends on your credit score and the kinds 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—perks besides the low rate. Credit cards offered by credit unions also tend to carry lower interest rates, but you need to be a member of the credit union to apply.
Types of cards 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 out card benefits or recovering losses from people who don’t make payments.
How to Qualify for a Good Credit Card Interest Rate
Credit cards often have a range of rates. The rate you qualify for depends on your credit score. The most creditworthy applicants—those with higher credit scores— usually 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 let you know the terms you were approved for, including the interest rate and the credit limit. You can improve your chances of qualifying for a lower interest rate by improving your credit score.
Comparing Credit Card APRs
You can get a feel for a good credit card APR by looking at the terms of several different credit cards and comparing them to each other
Keep in mind: The credit card APR matters most if you plan to carry a balance on your credit card from month to month. Paying off your full balance each month allows you to avoid paying interest altogether, which is a good habit, especially if you can’t qualify for the lowest rates. Make sure you’re not spending more than you can afford to ensure 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 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.