Key takeaways
- A good credit card APR is a rate that's at or below the national average, which currently sits above 20 percent.
- While there are credit cards with APRs below 10 percent, they are most often found at credit unions or small local banks.
- If you don't have good credit, you’re likely to receive a higher credit card APR.
- To qualify for a strong APR, practice good credit habits, including paying your credit card bill each month and keeping your credit utilization low.
A credit card’s annual percentage rate (APR) is the fee you’ll pay for borrowing money with your card. If you carry a balance beyond your credit card’s grace period, your APR determines the amount of interest the card issuer can charge on that balance.
Understanding how credit card interest works will help you choose the credit card that is likely to offer the best APR package. Here’s what to consider when comparing credit card APRs:
What’s a good credit card APR?
While there are many different types of credit card APRs, the most common rate people tend to look at is a purchase APR — the interest rate you pay on purchases.
To know whether a credit card has a good APR, compare it with the average credit card APR, which is currently above 20 percent. If the card’s APR is below the national average, that’s a good APR.
Even a credit card at the national average is a good option, especially if you’re looking at one of today’s best credit cards that comes with rewards, bonuses and perks. Try to avoid cards with APRs that are significantly above the national average. If you carry a balance on those cards, you could end up paying a lot of money in interest.
Some cards offer 0 percent interest for an introductory period on purchases, balance transfers or both, which can be a great way to save on purchases or debt you transfer to the card. Depending on the card, this intro period could be 12 months or longer.
How to find your APR
There are several ways to find out your card’s purchase APR. When you open your account, your purchase APR, along with the cash advance and penalty APRs, should be listed in the Schumer box of the card’s terms and conditions document. This is the easiest way to confirm your card’s interest rates and fees.
Your monthly card statement should also state your APR for different kinds of balances toward the end of the statement. You can also always call your issuer directly, using the customer service number on your account.
How APR affects your card balance
Carrying a balance on your card will accumulate interest. If you’re not careful, your card’s APR can cost you a lot of money over time as it adds to your card balance and usually compounds daily. That’s why Seychelle Thomas, a credit cards writer at Bankrate, decided to let her high-interest credit card get closed by the issuer.
When I was in my early twenties, I ended up getting an Express store card on a whim. After the initial excitement of getting approved wore off, I started reading through my card statements and noticed a pretty high interest charge. That’s when I checked the terms and noticed an absurdly high APR. After that, I chose not to use it since it had a pretty small limit anyway, and I just let the issuer close it out. That same card today has an APR of 35.99 percent.— Seychelle Thomas, Bankrate Credit Cards Writer
How much interest you’re charged depends on your card’s APR, the size of your balance and the size of your monthly payment. The key to avoiding mounting interest is to pay your balance in full and on time every month. Most card issuers offer a grace period before interest applies to your purchases. If you’re considering a card with an extremely low APR (below 10 percent), be wary of the fine print. These cards might not have a grace period, which means you accumulate interest as soon as you make a purchase.
Different Transaction Types = Different APRs
How much interest you’re charged also depends on what kind of transaction you’re making. Most cards offer different APRs for purchases, balance transfers and cash advances, so be sure to check your card agreement before you use your card.
What to expect from credit cards with high APRs
Credit cards with higher APRs typically differ from those with lower APRs in a few ways. Cards with high APRs might come with:
- More relaxed credit score requirements
- Less card benefits and perks
- Less flexible or less valuable rewards rates
- More numerous or expensive fees
This doesn’t mean you should always avoid cards with high APRs — they can still offer great value for cardholders. Store and retail credit cards are a good example. They’re easier to qualify for than standard rewards credit cards, and feature reward opportunities that are specific to certain brands and stores as opposed to general spending categories.
Brooklyn Lowery, a senior credit cards editor at Bankrate, still finds value in her Banana Republic Rewards Mastercard despite its high APR.
“My family of four does a lot of our shopping at the Gap family of brands, and the rewards the card offers are a nice discount on our purchases,” says Lowery. “There’s no annual fee, and I always pay the statement balance in full, so the exorbitant interest rate doesn’t affect me. Overall, the card adds to my length of credit history and allows me to earn rewards with shopping I’d be doing anyway.”
However, Lowery stresses that store credit cards aren’t for everyone. “I wouldn’t recommend the card — or any store card — for most people,” she says. “A general rewards card or card for building credit is usually a better option and often with far better rates and fees.”
If you don’t frequent a certain store enough to get good use out of the card, it’s likely not worth signing up for.
Credit-building cards, like Lowery mentioned, are another good example of cards that tend to come with high APRs but can still be worth carrying. These cards often feature lower credit limits and high fees alongside their high APRs in exchange for allowing those with poor or fair credit to qualify. It’s a tradeoff that can ultimately work in your favor if you’re looking to build or rebuild your credit.
How to compare credit card APRs
When comparing credit cards, it’s important to weigh factors that can either save you money or make using the card more expensive, starting with each card’s APR range. However, the APR alone shouldn’t be the only consideration. While looking for a card with a low APR is a great approach, you might want to consider a card with a higher APR that comes with rewards that fit your lifestyle.
For example, let’s compare two of the best cash back credit cards, the Wells Fargo Active Cash® Card and the Citi Double Cash® Card:
| Card Name | APR | Cardholder Perks |
|---|---|---|
| Wells Fargo Active Cash® Card | 20.24%, 25.24%, or 29.99% Variable APR |
|
| Citi Double Cash® Card | 19.24% – 29.24% Variable APR |
|
While the Citi Double Cash offers a slightly lower APR at 19.24 percent to 29.24 percent variable APR, it doesn’t offer an introductory APR promotion on purchases — only balance transfers. And unlike the Wells Fargo Active Cash, which will give you 2 percent cash back upfront, the Citi Double Cash will only give you 2 percent cash back total after you pay off your purchase.
The Wells Fargo Active Cash’s higher APR might be worth taking advantage of the card’s simplified 2 percent cash back rewards rate and 15-month 0 percent intro APR period on both purchases and balance transfers (followed by a 20.24 percent, 25.24 percent or 29.99 percent variable APR.)
If you’re planning to do a balance transfer and need a longer payoff period, however, you could benefit from the Citi Double Cash’s lengthier introductory APR balance transfer period in addition to its lower variable APR, especially if you plan on paying your bills in full each month.
And be aware of the penalty APR that may be applied if you miss a credit card payment. The Citi Double Cash charges a variable penalty APR of 29.99 percent or higher after a missed payment. The Wells Fargo Active Cash, however, doesn’t have a penalty APR (although you could be charged a fee of up to $40 for a late payment.)
How to qualify for a good credit card APR
While it’s easy to say that you should always look for credit cards that offer APRs at or below the national average, getting a good purchase APR will depend on your credit score. People with below-average credit scores tend to be offered higher interest rates than people with good or excellent credit.
If you want the best credit card APR possible, work on improving your credit score first. After your FICO Score reaches 660, your credit moves from the credit classification “subprime” to “prime.” A prime credit score unlocks your eligibility for prime — that is, lower — interest rates. As your creditworthiness continues to improve, you’re likely to receive even stronger credit card offers from lenders.
Therefore, focus on building or maintaining solid credit by developing good credit habits, such as making sure you:
- Pay your credit card statement’s minimum payment on time, every time. Your payment history makes up 35 percent of your credit score, so make sure it’s positive.
- Don’t max out your credit cards. Keeping your balances low can improve your credit utilization ratio, which affects your credit score.
- Pay off as many of your outstanding balances as possible. When you prioritize paying down existing debts, you avoid unnecessary interest, fees and penalties.
As your credit score improves, look for credit cards with low interest rates that you can qualify for. And don’t hesitate to reach out to your existing card issuer to negotiate a lower interest rate if you see an improvement in your credit score.
The bottom line
Generally, a good APR for a credit card is at or below the national average. But the APR you ultimately get depends on your creditworthiness and credit history. Work on improving your score to as high a number as possible to unlock access to credit cards with lower interest rates. A balance transfer credit card can help you pay down your old balances interest-free — but the best way to avoid credit card interest is to not carry a balance at all.
