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To determine what a good APR is for a credit card, you need to compare it to the average credit card APR, or annual percentage rate, in the U.S. According to the Federal Reserve, the average credit card APR (or average credit card interest rate) was 14.51% for November 2021, the most recent data available at the time of this writing.In this article, we’ll dive further into the questions of what APR is, what’s a good APR for a credit card — as well as how that answer can vary depending on your credit score — and how you can qualify for a good credit card APR or lower yours.
What Is a Credit Card APR?
Annual percentage rate (APR) is one of the credit card terms you should know if you want to fully understand the way credit cards work. Credit card APR — also known as the credit card interest rate — is the amount that you’ll pay in interest on your outstanding credit card balance after your billing cycle is over. However, most credit cards allow you to avoid interest charges when you pay off your balance in full each month. Unless you have a no-interest credit card, carrying a balance can negatively affect your finances.
How to Determine Your APR
To determine your APR, you simply need to look in your credit card’s terms and conditions. Your terms and conditions should list your credit card APR, including the different rates by APR type. You can find your terms and conditions on your credit card issuer’s website, or you could reach out to your issuer directly for the information.Additionally, you can typically find your credit card APR listed on your most recent credit card statement.Once you know your credit card’s APR, you can use it for calculating credit card interest to be able to figure out how much you’ll owe.
Types of Credit Card APR
Credit cards often have different APRs for different types of spending. The rates of these different types of APR can vary between cards and even within the same card.
1. Introductory APR or Promotional APR
Some cards offer an introductory or promotional APR to new customers for purchases or balance transfers made within the initial months of account opening. These introductory rates are usually 0%, but can be a rate that is lower than purchase APR for the card.By law, these promotional financing offers must last at least six months, and the most competitive ones will last for over a year. After the special introductory or promotional APR period ends, the regular purchase APR (discussed below) will apply to your remaining balance.
2. Purchase APR
A purchase APR is the standard rate for new purchases on a credit card. When you don’t pay your full balance for purchases made on your card, you will incur interest charges at the purchase APR. This is the most common APR type.
3. Cash Advance APR
A cash advance APR is the rate you’re charged if you use your credit card like a debit card to withdraw money from an ATM. Cash advance APRs are usually high, as they represent a higher risk of default. Also, cash advance transactions usually incur additional fees that typically can’t be waived even if you pay your statement balance in full.
4. Penalty APR
A penalty APR is the rate you’ll be charged if you don’t make your minimum payments on time, if you exceed your credit limit, or if your bank returns a monthly payment. Most credit cards charge a penalty APR, and it’s usually high.
5. Balance Transfer APR
A balance transfer APR is the rate charged to transfer balances from another credit card or loan to a new one. Balance transfers can help reduce interest costs, which can help you to pay down debt faster. Sometimes, credit cards will offer a promotional balance transfer APR to new customers. These promotional rates can be as low as 0% for a certain amount of months. After the promotional period, a standard balance transfer APR will apply.
Tips for Qualifying for a Good APR Credit Card
The easiest way to qualify for a good APR credit card is to have as strong of a credit history that you can and a good handle on the way credit cards work. To improve your credit score, you can take the following steps:
Make all of your credit card payments on time each month
Keep your balances low (i.e., avoid getting close to your credit limit) to improve your credit utilization ratio
Pay off as many of your outstanding balances as possible
In general, the better your credit score, the better APR you’ll likely be offered.
What Is Considered a Good APR for a Credit Card?
A good APR for a credit card is generally one that is at or below the national average APR. However, what is considered a good APR for you may vary depending on your credit score.
Average Credit Card APR
As mentioned earlier, the latest average credit card interest rate in the U.S. is 14.51% APR. However, average credit card interest rates are different for accounts that are assessed interest, as opposed to those for which interest charges are being waived because the statement balance is paid in full. As of November of 2021, the average interest rate for a credit card account being charged interest is 16.44% APR.
Excellent Credit
In general, people with excellent credit (740+) will usually qualify for the lowest interest rates. These individuals may be targeted for cards with 0% promotional APR offers. However, people with excellent credit are less likely to carry a balance on their credit cards, so some may not even worry about their credit card’s APR, as they generally avoid being charged interest in the first place.
Good Credit
After people with excellent credit, those with good credit (generally, scores between 670 to 739) will usually qualify for the next lowest interest rates. Sometimes those with good credit may even qualify for the lowest APR offers, depending on other factors. If you have good credit, you can likely expect to qualify for an APR that is close to the national average.
Fair Credit
People with fair credit (scores ranging from 580 to 669) generally have a higher APR on their credit cards. To avoid slipping into the poor credit category, it’s important to make on-time payments and to try to reduce your outstanding balances as much as possible.
Poor Credit
If you have poor credit, meaning a credit score of 300 to 579, you can probably expect to have a higher APR for your credit card. To the credit card issuers, someone with poor credit poses a higher risk of default. And because people with poor credit have the highest interest rates, it can also become very difficult for them to pay off credit card debt once it has accumulated.
Can You Lower the APR?
It is possible to lower your credit card’s APR. One way to do so is to call your credit card issuer and ask for a lower interest rate. The credit card issuer will sometimes lower your APR if you have a better payment history and less debt than you had when you opened your account.Another way to lower your APR is to improve your credit. The better your credit score, the more likely you are to receive a lower APR from your next card.
Compare Credit Card Offers With Lantern
As you can see, the answer to the question, “what is a good APR for a credit card?” can vary depending on your credit score. Those with excellent credit are likely to have a different range for a good credit card interest rate than those with a poor score. However, the national average APR can serve as a benchmark for a good APR for a credit card. Generally, a good APR will be near or below that national average. If you want a better APR on your card, you may want to look at credit-building cards. Lantern by SoFi can help you to jumpstart your search.
Frequently Asked Questions
Is APR on credit cards monthly or yearly?
How is APR calculated for a credit card?
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About the Author
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.
