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What Can Increase Your Credit Card’s APR?

What Can Increase Your Credit Card’s APR?
Jason Steele
Jason SteeleUpdated August 9, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Your credit card’s APR (annual percentage rate) is a measure of the interest rate you’re charged on the outstanding balance on your account. If you regularly carry a balance on your credit card, any increase in your card’s APR means that you will incur higher interest charges. Knowing what can cause your APR to increase may help you make some changes to limit how much you pay in interest. Read on to learn which of the following can increase your credit card’s APR.Recommended: Credit Card Terms, Explained

Four Reasons Why Your APR Might Have Increased

There are several factors that can account for a higher APR. Knowing what they are is key to understanding how credit cards work and why credit card interest rates increase.

1. Your Promotional Rate Ended

Many credit cards come with an introductory financing offer, which is often called promotional financing. These will feature either 0% APR or a reduced APR for a limited time on new purchases, balance transfers, or both. By law, these offers must last for at least six months, but the most competitive offers will last 15 months or longer. However, once the promotional rate expires, the higher standard rate will apply to any  remaining balance on your card. The good news: If you pay your balance in full before the promotional rate expires, you can completely avoid paying interest. Recommended: What is a Good APR for a Credit Card?

2. You Missed a Payment by 60 Days or More

The way credit card payments work is that most have a penalty interest rate which is much higher than the standard rate. The penalty rate applies when your payment is 60 days late or more. The credit card issuer must notify you of a rate increase 45 days in advance. To avoid being charged the penalty interest rate, it’s important to make all your payments on time and pay at least the minimum balance. You can set up autopay on your account to make your payments ongoing and automatic. 

3. Variable Rate of Your Card With Increasing Prime Rate

Nearly all credit cards offered in the United States now have a variable interest rate that’s tied to the Prime Rate. When the Federal Reserve Bank changes the Federal Funds Rate, the Prime Rate will rise and fall accordingly. At that time, all credit cards with a variable rate will rise and fall as well. Unfortunately, this is out of the control of cardholders. This resource can help you learn more about average credit card interest rates.

4. You Took Out a Cash Advance

When you use your credit card to withdraw money from your bank via an ATM or teller, this is called a cash advance. Basically, you are borrowing money against your credit card’s line of credit. With nearly all credit cards, cash advances carry a higher than standard APR. In addition, cash advance balances are usually subject to a fee, and they do not have an interest-free grace period. That means a cash advance will be subject to interest charges from the day you take it out until the day you pay it off. If you need money, and you have enough in your savings or checking account, you’re much better off obtaining it from your bank account instead.  

What to Do if Your APR Increases

If your APR increases, you have a few options. First, you can avoid interest charges by paying off your balance. If you can’t pay the entire balance, paying some of it will help. Other strategies include choosing a credit card with a lower interest rate, or opening an account with a card that has a 0% APR promotional financing offer. These options will only be available to you if you have good or excellent credit, however. If your credit has improved since you opened your account, you can try contacting the credit card issuer and requesting a lower rate.

The Takeaway

Your APR impacts how much you pay in interest. There are several reasons your APR can increase, including the expiration of a promotional financing offer on your credit card, taking out a cash advance, or being more than 60 days late with payments to your account. Understanding what can increase your APR can help you take steps to keep it as low as possible. If you’re trying to find a credit card with a low APR, Lantern by SoFi can help. With our online tool, you can easily compare credit cards to look for one that’s the best fit for you and your needs. 
Photo credit: iStock/SouthWorks
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)LCCC0322003

Frequently Asked Questions

Why did my credit card APR increase?
Is it good to have a high APR on a credit card?
What percentage of APR is high for a credit card?
Can I change my APR on a credit card?
Does APR apply to late payments only?

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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