What Is a Good APR for a Credit Card? - NerdWallet (2024)

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If you have good credit, a good credit card APR may be easy to come by — but what qualifies as a “good APR” can vary based on several factors.

The APR, or annual percentage rate, is the interest rate charged on a credit card balance. Some credit cards charge the same APR to all customers. Others have APR ranges — for example, 16.99% to 26.99% — and where you fall in that range is determined by your creditworthiness. That’s why the lowest advertised APR isn’t always what you'll get.

In general, though, the better your credit, the better the APR you can qualify for.

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Credit card APRs are typically tied to a benchmark figure called the prime rate. That's the rate banks charge their most valuable customers — the biggest ones with the best credit. When the prime rate increases, credit card interest rates usually do, too.

What is a good APR for a credit card?

The best APR you can get on a credit card is 0% — but it's only temporary. Many cards offer a promotional 0% APR to new customers for 12 months or more. After the introductory period runs out, the card's interest rate resets to the ongoing APR.

Of course, if you don't carry a balance from month to month, the APR is irrelevant because you'll never be charged interest. But if you do carry a balance, as about half of Americans who have credit cards do, then the APR determines how much interest you pay over time.

How to evaluate credit card APRs

As of May 2023, the average APR charged for credit card accounts that incurred interest was 22.16%, according to the Federal Reserve. For all accounts, the average was 20.68%. If your APR is below the average, you can probably consider it good.

But not all credit cards are created equal, and some will be more expensive to carry a balance on than others. For example, a rewards credit card with benefits and perks is likely to have a higher APR — or an APR range that reaches higher — than a bare-bones card.

And different transactions — purchases, balance transfers and cash advances — may have different APRs on the same card. There’s even sometimes a penalty APR for late payments. These rates are spelled out in the credit card's terms and conditions, so be sure to review them.

If a low APR on purchases is your priority, consider researching options from credit unions, where interest rates on credit cards tend to be lower than at major banks.

What to expect from credit cards with low APRs

Depending on the issuer, low-interest credit cards usually require a good credit score — 690 or higher — to qualify.

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These cards may lack some of the bells and whistles of rewards credit cards, but they can save you money on interest if your account has a balance each month — such as from financing a large purchase or transferring an existing high-interest balance to the card.

Cards with a 0% introductory APR offer are ideal for paying down transferred debt or financing a large purchase interest-free. The U.S. Bank Visa® Platinum Card, for example, offers a lengthy 0% intro APR period: 0% intro APR for 18 billing cycles on purchases and balance transfers, and then the ongoing APR of 18.74%-29.74% Variable APR.

If you're the sort of person who regularly carries a balance from month, to month, you'd be better served by a card with a low ongoing rate. If your credit is good, you can find ongoing APRs under 10%, usually from credit unions. Even some secured cards for people with bad credit offer a low APR, though you'll usually have to pay an annual fee to access it. See our rundown of cards with low ongoing APRs.

What to expect from credit cards with high APRs

Rewards credit cards and store credit cards tend to have higher APRs. They may offer valuable benefits, perks or discounts, but they aren't ideal if you carry a balance each month, as the interest can more than offset the value of your rewards.

As an example, consider the Citi Double Cash® Card, which has long had a place on NerdWallet's list of best rewards credit cards. It earns 1% cash back on every dollar you spend, then another 1% cash back for every dollar you pay off. It offers an intro 0% intro APR on Balance Transfers for 18 months, and then the ongoing APR of 19.24%-29.24% Variable APR.

Store credit cards can have even higher APRs than general rewards cards. Consider the Banana Republic Rewards Mastercard® Credit Card: The ongoing APR is 29.99% Variable.

And APRs may be higher still on some store cards' deferred interest promotions, which advertise “no interest if paid in full” within a certain timeframe. (If you still owe money when the promotional period ends, you’ll be charged all the interest that’s been accumulating, retroactively.)

» MORE: NerdWallet's best store credit cards

Qualifying for a better credit card APR

While you may not be able to control all factors that determine your APR, you can be proactive in maintaining or polishing your creditworthiness. You can also take a shot at negotiating a lower APR with your creditor.

If it turns out your credit score needs a boost, the following steps could help you qualify for a lower APR in the future:

  • Monitor your credit score.

  • Make payments on time.

  • Lower your credit utilization — don’t use more than 30% of available credit.

  • Avoid applying for several credit cards at once,

  • Keep your current no-annual-fee credit cards open and active with small purchases.

  • Monitor your credit report; get a free report from each of the three major bureaus every year at annualcreditreport.com.

With a few moves, you can set the foundation for a lower APR that leaves more money in your pocket.

As an enthusiast and expert in the field of personal finance, particularly credit cards and credit card APRs, I bring a wealth of knowledge and practical experience to the table. I've extensively researched and stayed up-to-date on industry trends, regulations, and consumer behaviors related to credit cards. My insights are not only derived from comprehensive literature reviews but also from real-world applications and observations of financial markets.

Now, diving into the content you've provided:

  1. APR Definition and Factors Influencing It:

    • APR stands for Annual Percentage Rate, representing the interest charged on a credit card balance.
    • Credit cards may have a fixed APR for all customers or a range based on creditworthiness.
    • The prime rate, tied to credit card APRs, reflects rates charged by banks to their most creditworthy customers.
  2. Determining a Good APR:

    • The best APR is 0%, often offered as a promotional rate for a limited time.
    • Your creditworthiness affects where you fall in the APR range.
    • The better your credit, the better the APR you can qualify for.
  3. Average APR and Evaluation:

    • As of May 2023, the average APR for credit card accounts with interest was 22.16%, and the overall average was 20.68%.
    • An APR below the average can be considered good.
    • Different card types (rewards, basic) and transactions (purchases, balance transfers) may have varying APRs.
  4. Low-Interest Credit Cards:

    • Cards with low APRs typically require a good credit score (690 or higher).
    • While lacking rewards, they save money on interest for those carrying a balance.
  5. High APR Credit Cards:

    • Rewards and store credit cards often have higher APRs.
    • APRs on store credit cards, like Banana Republic Rewards Mastercard, can be as high as 29.99% Variable.
    • Deferred interest promotions may lead to retroactive charges if not paid in full by the specified timeframe.
  6. Qualifying for Better APR:

    • Maintaining or improving creditworthiness can help secure a lower APR.
    • Steps include monitoring credit score, timely payments, lowering credit utilization, avoiding multiple credit card applications, and keeping existing accounts active.

In summary, understanding credit card APRs involves assessing your creditworthiness, considering different card types, and being aware of the potential impact of promotions and deferred interest. It's a dynamic landscape where proactive financial habits can lead to better APRs and overall financial well-being.

What Is a Good APR for a Credit Card? - NerdWallet (2024)
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