What is a good APR for a credit card?
The APR of a credit card, or annual percentage rate, quantifies the cost of taking out credit. In other words, if you carry a balance beyond your credit card’s grace period, your APR will determine how much interest the card issuer can charge on that balance. So what is a good APR credit card?
If you want to know if a credit card has a good APR, compare it to the average credit card interest rate. Currently, the average credit card APR is around 16%.
If your card’s APR is lower than the national average, that’s a great APR. Even a nationally averaged credit card is a good option, especially if you’re looking for one of today’s best credit cards that includes rewards, bonuses, and perks. Try to avoid credit cards with an APR that is significantly higher than the national average. If you have a balance on these cards, you could end up paying a lot of interest.
Understanding how credit card interest works will help you choose the credit card that is likely to give you the best APR package.
What is a good APR credit card?
While there are many types of credit card APRs, the main thing to consider when it comes to credit cards is the purchase APR – the interest rate you pay on purchases.
While it’s easy to say that you should always look for credit cards that offer an APR equal to or below the national average, your credit history could make matters a little more complicated. A good purchase APR for you really depends on your credit score. For example, an APR of 20% won’t be very appealing to someone with great credit who is used to being offered APRs as low as 14%. But a 20% APR may seem good enough for someone with fair credit, especially if they are just emerging from bad credit and being offered APRs closer to 29%.
People with below average credit scores will likely be offered higher interest rates than people with good or excellent credit, so it’s important to consider your current financial situation rather than just aiming a specific number.
If you want the best credit card APR possible, you might want to start by improving your credit score. Once your FICO credit score exceeds 670, your credit will go from “subprime” to “prime”. This means that you will start to be eligible for preferential interest rates. As your creditworthiness continues to improve, you will be more likely to receive lower credit rate offers from lenders.
Learn more: Best credit cards for good credit
How to Compare Credit Card APRs
When comparing credit cards, take a look at the APR range of each card. If you are evaluating the best rewards credit cards, for example, you might notice that the Blue Cash Preferred® card from American Express offers a variable APR of 13.99% to 23.99% and the Chase Sapphire Preferred card. ® offers a variable APR from 15.99 percent to 22.99 percent. The lowest APR you can get with the Chase Sapphire Preferred is around the national average APR of 16%, but that’s two percentage points higher than the lowest APR you can get with the Blue. Cash Preferred.
You’ll also want to check if the credit card comes with an introductory APR on purchases and / or balance transfers and if you’ll be stuck with an APR penalty if you miss a credit card payment.
The Blue Cash Preferred card, for example, comes with 12 months of introductory APR of 0% on purchases (then 13.99% to 23.99% of variable APR) while the Chase Sapphire Preferred does There is no introductory APR offer. But if you miss a payment with either card, you can earn an APR penalty of 29.99% (variable).
How to qualify for a good APR credit card
The best way to get a good APR is to practice good credit habits. Here are some actions you can take now to improve your score:
- Make all of your credit card payments on time, every time. Payment history is 35% of your credit score, so make sure you keep a good one.
- Avoid maxing out your credit cards. Keeping your balances low will improve your credit usage rate and help boost your score.
- Pay off as many of your outstanding balances as possible. Work on getting rid of your debt.
As your credit score improves, look for low interest credit cards. The better your credit rating, the better the interest rates you are likely to be offered.
How To Reduce Your Credit Card APR
There are two ways to reduce the APR on your credit card. The first way to get a better APR on your credit card is to call your credit card issuer and ask for a lower interest rate. If calling customer service and asking for a lower APR makes you nervous, keep in mind that a December 2020 survey from CreditCards.com found that 69% of cardholders who requested a rate cut received one. .
Credit card issuers are even willing to lower interest rates for people who are having trouble making their monthly payments. So if you’re having a hard time paying off your debt, contact your credit card issuer and ask if you can be considered for a hardship program.
The other way to reduce the APR on your credit card is to build your credit. In some cases, lenders will offer better interest rates – including promotional 0% APRs – to their more creditworthy customers. Even if your current credit card issuers do not reduce your APR in response to your newly improved credit score, you will be more likely to receive good credit card APRs when you apply for new credit cards or loans. .
The bottom line
What is a good APR credit card? In general, a good APR on a credit card is at or below the national average, which currently hovers around 16 percent. A good APR for you, however, depends on your credit score. Work on getting your score as high as possible to gain access to credit cards with lower interest rates. If you want to avoid paying interest on credit cards, balance transfer credit cards can help you pay off your old balances without interest, but the best way to avoid interest on credit cards is to never have a balance.