What Is a Good APR for a Credit Card (What Annual Percentage Rates are Low, Average, and High)

Keep an eye out for credit cards with low promotional rates on balance transfers, preferably 0%. While switching to a new credit card can have a negative impact on your credit score, the lower interest rates will probably benefit your financial well-being in the long run.

For those who can pay off the entire balance, this really helps increase your credit score and qualify for a lower APR. Paying off your balance will decrease the interest charges every month and will give you more leverage if you choose to negotiate for a lower APR rate.

Try out our free credit card payoff calculator to find out how to pay off your balance.

If you believe you’re entitled to a lower APR, you can submit a request directly through the card issuer. Requesting a lower interest rate can be done through a customer service specialist. It’s worth noting that sending a request does not guarantee approval, and some card issuers may not even accept your request in the first place. But wait, how do banks and credit card issuers determine APRs in the first place?

While some credit cards will charge the same APR across all customers, many credit card companies also set ranges—your creditworthiness will determine where you fall in that range. Those with good credit scores are more likely to get lower interest rates. According to the2021 Consumer Credit Card Market Report, here are the APR rates you should expect to receive based on your credit score—

• Superprime (740+): 16%–18% APR

• Prime (670–739): 20%–22% APR

• Subprime (580–669): 22%–24% APR

• Deep Subprime (less than 579): 24%+ APR

*Note that these figures are based on 2020 findings and only serve as a general guide. Always check with your credit card issuer to confirm your APR rates. Banks and credit card companies express their trust in you by calculating a credit score. The higher you rank, the better the options you get. Check your credit score with Credit Karma(an easy tool that won’t harm your credit score) and get a better APR now.

To stay on top of your APR charges, you can easily calculate how much APR is being applied. Follow these easy steps—

1. Identify your current balance and APR rate

2. Divide the APR by 12 (to represent the months in the year)

3. Multiply the number by the balance amount

For example, you owe $700 on your credit card and your APR is 16%. Divide 16% by 12 = 0.0133. Multiply $700 x 0.0133 = 9.31. So, you can see you’re being charged an interest of $9.31 based on your current $700 balance. But this is just your standard scenario as there are different APR types (more on that later). First, let’s see how you can get a better deal now—

New cardholders may be entitled to an introductory APR to cover purchases and balance transfers. Depending on the credit card, this introductory APR can start from 0% and be applicable anywhere between 6–21 months.

As the standard type of APR, the purchase APR refers to the interest rate you’ll be charged for purchases with your credit card. The interest rate generally takes effect if you fail to pay the total balance by the monthly due date, and you carry what you owe onto the next month. This is the most common type we find in the wild.

The balance transfer APR refers to the interest rate charged to the amount you transfer to a credit card from another card or loan. The fee for a transferred balance typically stands between 3%–5%.

The cash advance APR is the interest charged when you make a cash withdrawal from your credit account—often used to get your hands on fast cash. Cash advance APRs come with additional charges, making the rates higher than the purchase and balance APRs. Expect to be charged between 3%–5% for a cash advance fee. Additionally, cash advances usually don’t have a grace period, so you start building interest as soon as you take the cash advance out. Avoid this type of transactions because they involve added charges to begin with.

You can be charged a penalty APR if you don’t make the payment on time or miss it altogether. In many cases, the penalty APR will be higher than the standard interest rates and reach up to 29.99%, which is the maximum banks are permitted to charge. Be careful… continued late payments can result in the penalty rate being applied to your account indefinitely. For new cardholders, if you’re charged with a penalty APR, this will likely render your introductory offer void and harm your credit score.

Card issuers will be looking at your creditworthiness to determine your APR, and having a higher credit score will give you more leverage when negotiating a lower APR. Bad credit score? Follow our easy tips if you want to improve your credit now.

Read more on credit:

• How to Build Credit - Tips to Develop a Good Credit Score

• How to Establish Business Credit—and Then Build It Fast

• How Long Does It Take to (Re)Build Credit? Tips, Tricks, and Timeframes

• How to Build Credit Without a Credit Card: 10 Easy Ways to Build Credit

Your payment history makes up approximately 35% of your total credit score. So, a great way to improve your credit is to make on-time payments. Set up automatic monthly payments if you have trouble remembering when it’s time to pay up.

Credit utilization is the balance amount divided by the sum of your card’s credit limits. To improve your credit score, keep the utilization ratio rate below 30%.

The length of your credit history covers around 15% of your total credit score. If you want to increase the average length of your credit history, we recommend not closing any no-annual fee card accounts. You can also make small charges on older accounts to avoid inactivity and closure of the account.

Those with an excellent credit score are more likely to get a low APR credit card, as it shows that you’re more likely to make timely payments.

• Credit scores that range from good to excellent will give you a good chance to qualify for 0% introductory offers.

• Credit cards with 0% introductory APR offers are a great choice if you want to pay down transferred debt or plan to finance a substantial interest-free purchase.

• Low APR cards are also recommended for those carrying a balance from month to month, as the interest rates will be lower—giving you the opportunity to pay down the balance faster.

Despite having a high APR rate, you can still avoid interest charges if you are committed to paying off your balance every month. To do so, only use your credit card for purchases you can afford to pay, and aim to pay off weekly purchases, so your balance doesn’t get too high.

High APR rates are often attached to reward cards and premium cards, which can offer several benefits, such as travel credits, high reward rates, and travel insurance. However, be aware that if you’re carrying a monthly balance, the interest rates can often be more than the value of the benefits and rewards.