Whats a Good APR for Credit Cards and How to Choose

A good APR for credit cards can vary depending on your credit score and financial goals. Typically, a good APR is 12.99% or less for excellent credit, but it can be much higher for poor credit.

If you're looking for a low-interest credit card, consider one with an APR of 10.99% or less. This can save you money on interest charges over time.

For example, a credit card with an APR of 14.99% can cost you $120 in interest charges on a $1,000 balance over a year.

Your credit score plays a significant role in determining your APR, as credit card issuers use it to assess your creditworthiness.

The average APR fluctuates with the economy, making it essential to compare APR ranges when considering different credit cards.

APR is a complex concept, but it's essential to understand what it means for your finances. APR stands for Annual Percentage Rate, which is the interest rate charged on a loan or credit product.

APR is calculated as a yearly rate, but you'll likely be charged interest on a monthly basis. This can result in a higher total cost than you initially anticipated.

The APR is made up of two main components: the nominal interest rate and the fees associated with the loan. Understanding these components can help you make informed decisions about your borrowing.

APR can vary significantly depending on the lender, credit score, and loan terms. For example, a credit card with a high APR can end up costing you thousands of dollars in interest over time.

APR is not the same as interest rate, although they're often used interchangeably. The interest rate only accounts for the nominal rate, while APR takes into account the fees and compounding interest.

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A good APR for a credit card can vary depending on your credit score, as credit card issuers use it to determine your interest rate. This means different applicants may be offered different APRs.

The average APR fluctuates with the economy, so it's a good idea to compare the APR ranges in the current terms of any cards you're considering.

There are several types of APRs you should know about when it comes to credit cards. The most common type is the purchase APR, which applies to any balance carried forward from one month's bill to the next.

Introductory APRs are another type, often offered for a fixed time period, and can be as low as 0%. However, these rates usually expire after 12 to 18 months, and the APR on any remaining balance will increase significantly.

Cash advance APRs are higher than standard purchase APRs and can be up to 30%. They're also subject to cash advance fees. A cash advance is when you use your credit card to take out cash, and it's treated as a loan that you'll need to pay interest on.

Variable APRs can change over time and are usually based on the Prime Rate or some other benchmark, plus a specific amount determined by the lender. Fixed APRs, on the other hand, are determined at the time you open your account and won't change, even if the Prime Rate decreases or your credit score changes.

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Here are some key differences between the types of APRs:

Penalty APRs are also worth noting, which can be applied if you've fallen behind on payments or had a returned payment. This means you'll be required to pay a higher APR than your original purchase APR for at least 6 months.

It's also worth mentioning that the type of card you have can affect the APR you're offered. For example, cash back cards and 0% balance transfer cards tend to have lower APRs than airline-branded travel rewards cards.

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Lowering a high interest rate can be a game-changer for your finances. You can negotiate with your credit card company to lower your APR, especially if you've been a good customer and paying as agreed. In fact, 76% of cardholders who asked to lower their credit card's APR were successful, with an average reduction of 6.5 percentage points.

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If negotiation doesn't work, you can apply for a credit card with a low APR. The lower your APR, the less interest you'll pay over time. Consider applying for a different card if your current company is unwilling to lower your rate.

Sometimes, it makes better financial sense to look for an alternative to carrying debt on a high-APR card. A personal loan or a 0% balance transfer credit card may be a better option. For example, a 0% introductory period of 12 to 15 months on purchases and balance transfers can make a huge difference in paying down debt.

To increase your chances of success, focus on building your credit score before applying for a credit card. The higher your credit score, the lower your APR. A good credit score, perhaps 680 or higher, can also help you qualify for a 0% balance transfer credit card.

Here are some tips to mention when requesting a lower APR:

Carrying a balance on your card will accumulate interest, so it's essential to pay your balance in full and on time every month to avoid mounting interest.

The key to avoiding interest is to pay your balance in full and on time every month, and 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, as these cards might not have a grace period, which means you accumulate interest as soon as you make a purchase.

A balance transfer involves transferring debt from one location to another card account, usually with a low or zero APR, which can be a good way to consolidate debt or eliminate/lower interest payments.

Balance transfers also often come with balance transfer fees, so the process is not free, and the low intro APR will eventually expire, applying the standard APR to the remaining balance.

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You may want to pay off the balance transfer as soon as you can (so you don’t accrue more interest), and the Discover credit card interest calculator can help you calculate your balance using different APRs to find out how long it’ll take to pay off your credit card at your current rate vs. a lower rate.

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The average interest rate on new credit card offers is a whopping 24.26%. This is based on data from credit card issuers, which shows that the minimum APR is 20.79% and the maximum APR is 27.73%.

For those with really good credit, the average APR offered is 20.79%, while those with really crummy credit are offered an average APR of 27.73%. This can make a huge difference in the amount of interest you pay, as we'll see in a moment.

If you owe $5,000 on a card and pay $250 a month, you'll pay $1,787 in interest and take 28 months to pay it off at an APR of 27.73%. Lower the rate to 20.79% and you'll pay just $1,192 in interest and take 25 months to pay it off.

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The good news is that the average FICO Score of Americans in April 2024 was 717, which may make it easier for people to qualify for lower interest rates. However, those who don't qualify will still be hit with high interest rates.

On average, the APR for all credit card accounts is 21.47%, while the average APR for accounts assessed interest is 22.80%. This is based on data from the Federal Reserve, which shows that nearly half of active credit cardholders carry a balance.

Here's a breakdown of the average APR for different types of credit card accounts, based on data from the Federal Reserve:

Keep in mind that these numbers are averages, and your actual APR may be higher or lower depending on your credit score and other factors.

The average credit card APR is above 20 percent, so a good APR is one that's below the national average. If you're looking for a good credit card APR, compare it with the average credit card APR.

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If you carry a balance on a card with an APR significantly above the national average, you could end up paying a lot of money in interest. To avoid this, try to find a card with an APR below the national average.

The type of card you shop for also makes a difference in what APR to expect. For example, cash back cards and 0% balance transfer cards tend to have lower APRs than airline-branded travel rewards cards.

The average APR offered to people with good credit is 20.79%, while those with bad credit are offered an average APR of 27.73%. This highlights the importance of maintaining good credit to qualify for lower interest rates.

The type of card you choose can significantly impact the APR you're offered. Store cards often have the highest APRs, while cash-back cards tend to have lower APRs.

If you're looking for a card with a low APR, consider a cash-back card or a 0% balance transfer card. These types of cards usually have lower APRs than airline-branded travel rewards cards.

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Secured credit cards, which require a deposit to open and are typically held by folks new to credit or rebuilding it, have the highest APRs overall.

Cards with the lowest rates often come from credit unions as opposed to major banks, so you might need to expand your search if finding a credit card with a low APR is your top priority.

Penalty APRs can be a harsh reality for credit card holders who fall behind on payments. A penalty APR can be as high as 30% if you make a late payment, spend over your credit limit, or your payment can't be processed due to insufficient funds or a closed account.

If you're not making the minimum payments on time, you may face a penalty APR that can be as high as 30%. This can significantly increase the amount you owe and make it harder to pay off your debt.

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The good news is that if you make the minimum payments due, you'll be carrying a balance subject to the standard purchase APR. But if you're making those payments on time, your card issuer won't impose a penalty APR.

To avoid a penalty APR, make sure to review your cardmember agreement to see how it will apply to your account. This will help you understand the terms and conditions of your credit card and avoid any potential penalties.

Here's a quick rundown of the types of situations that may trigger a penalty APR:

Remember, a penalty APR can have a significant impact on your credit card debt, so it's essential to make timely payments and stay on top of your account.