What Is a Good APR for a Credit Card?

When shopping for a new credit card, one of the most important numbers to look at is the annual percentage rate. A credit card’s annual percentage rate, or the APR, is the cost of borrowing over a year. It includes interest and standard fees.

The lower the APR on a credit card, the less interest you’ll be charged on your balance. Even if you plan to pay your credit card bill in full each month and avoid interest altogether, understanding what’s considered a good rate can be helpful.

Before we introduce you to some of the ways to shop around for a credit card with a competitive rate, let’s take a closer look at what APR means in practical terms.

Credit Card APR Explained

Annual percentage rates are dependent on the prime interest rate, a benchmark figure which represents the lending rates banks offer to consumers with the highest credit scores.

Almost all credit cards come with variable interest rates which means that they fluctuate according to changes in the prime rate. In other words, when the prime lending rate changes, credit card rates tend to do the same.

Note that these APR shifts are usually so insignificant that you won’t be able to notice them unless you compare your monthly credit card statements.

If you’ve ever shopped for a credit card, you're probably aware that some credit card companies offer APR ranges, for example, 14% to 22%. In that case, the exact credit card rates you’ll be able to qualify for will be determined by your specific creditworthiness.

If you are among those consumers that pay their balance in full each month and make a point of not missing a deadline, getting the best APR deal doesn’t need to be your primary concern.

Instead, we suggest you evaluate card offers based on cashback rewards and other perks that match your lifestyle and spending habits.

However, if you can’t avoid carrying a balance or plan on financing a big purchase with your credit card, we recommend you look for low-APR solutions. That way, not only will you pay your credit card debt faster, but you’ll also potentially save a significant amount on interest.

The Average Credit Card APR

A good annual percentage rate on a credit card should fall below the current average rate. According to the Federal Reserve’s report on Terms of Credit at Commercial Banks and Finance Companies, the average interest rate for purchases on US credit cards has risen sharply in recent years, going from 14.51% by the end of 2021, to 21.76% by the end of Q3 2024.

Still, remember that the average rate doesn’t necessarily reflect the APR you’ll be charged on a credit card that you get approved for. In fact, the Federal Reserve also found that the national average annual percentage rate on all credit card accounts that incurred interest was even higher, ranging between 20.40% and 23.37% throughout the last two years.

The average credit card interest rate may also depend on the credit card type you’d like to apply for.

For example, unsecured credit cards usually charge lower rates, while secured credit cards come with higher APRs - the lower your credit score, the higher your APR. Credit cards designed for consumers who need to build or rebuild their credit profiles usually come with hefty rates.

Moreover, issuers of reward and store credit cards also tend to charge higher rates to cover the cost of offering certain perks and paying out bonuses. On the other hand, balance transfer cards may lack some of the bells and whistles you’d get with premium cards, but they typically offer significantly lower rates.

Types of APR on a Credit Card

Note that there are several types of credit card APRs, as different interest rates are applied to different types of balances. Getting the whole picture of how credit cards work can help you choose the options that offer the most affordable package.

Finding the lowest rates available for your credit situation requires a diligent comparison of different credit card offers. Here are the terms you should look for:

• Introductory APR: A promotional or an introductory APR is a lower interest rate (often as low as 0%) offered for a set number of months. Provided only to new cardholders, the intro APR on a credit card usually lasts between three to 18 months from the time the account is opened. Typically, it applies to purchase APR, balance transfer APR, or both. Intro APR offers can be extremely helpful, especially if you are planning to transfer a balance. However, make sure to read the fine print and pay your credit card bills before the regular rate kicks in.
• Purchase APR: This is the regular interest rate you’ll pay on purchases. Note that purchase APR can be avoided as long as you pay off your statement balances before the end of your grace period. After the introductory period, most credit card issuers offer a range of variable APRs. Remember that your exact rate is determined by your creditworthiness. In general, low-interest-rate credit cards are reserved for consumers with good to excellent scores, while applicants with lower credit scores end up with higher rates.
• Balance transfer APR: This is the interest rate you’ll pay on balance transfers. Note that balance transfers and purchases often carry the same ongoing annual percentage rate.
• Cash advance APR: Typically slightly higher than the purchase APR and the balance transfer APR, this is the credit card interest rate consumers pay on cash advances. Considering that there is no grace period on cash advances (the interest accrues the moment you take the advance), we suggest you avoid this type of financing whenever possible.
• Penalty APR: If you miss a payment, not only will your credit card issuer charge you a late fee, but it may also raise your rate. Penalty APR is typically significantly higher than the rate you pay on purchases and balance transfers. On the plus side, not all issuers impose penalty credit card interest rates.

These rates are listed on the credit card issuer’s website. If you’d like to review the APRs on your existing card, the quickest way to find this information is by logging into your account on the credit card issuer’s website or mobile app.

Qualifying for a Good Credit Card APR

There are quite a few factors that contribute to the annual percentage rate you’ll receive when you open a new credit card account. While it’s impossible to control all aspects that determine your APR, there are a few things that you can do to ensure that you get the lowest possible rate.

Work on Your Credit

Being proactive about improving your credit history or maintaining your creditworthiness is one of the best strategies to employ. Start by checking your credit profile. If it turns out that your score needs a boost, make sure to follow these steps in order to qualify for credit cards with low APR in the future:

• Pay your credit card bills on time.
• Keep your credit utilization ratio below 30%.
• Avoid submitting multiple credit card applications at once.
• Keep your current credit cards open and active with small purchases.
• Monitor your credit report; request a free copy of your report from each of the three major bureaus on a regular basis.

Negotiate a Lower APR with Your Creditor

Another way to get a better APR on your credit card is by getting in touch with your card issuer and asking for a lower interest rate.

Credit card companies are willing to offer lower credit card APR rates to consumers who struggle with making on-time monthly payments.

If you’re having trouble keeping up with your payments, contact your creditor to see if you can qualify for a hardship program.