What is a good APR for a credit card?

Summary

• Credit cards have an annual percentage rate (APR) that determines the interest assessed on purchases and balance transfers, as well as any annual fees.
• APRs are variable, meaning they may change over time, depending on the card, your creditworthiness, and the U.S. prime rate.
• You could consider a “good” APR for a credit card as one that is below the national average.

Credit cards allow you to borrow money immediately to make purchases. If you don’t pay back what you borrowed within a billing cycle, you may be charged interest. The amount of interest charged in a billing cycle, as well as any annual fees for using your credit card, is referred to as your APR.

How is your APR determined?

Your credit card APR is based on your creditworthiness. If you’re very creditworthy — that is, you have a strong credit score, consistent payment history, and high income — you may qualify for a lower APR. If you’re less creditworthy, you may qualify for a higher APR.

A credit card may have a few different APRs, depending on the type of transaction, including:

• Purchase APR: The interest rate assessed on purchases you make with the card.
• Balance transfer APR: The interest rate assessed when transferring a balance from one card to another.
• Cash advance APR: The interest rate assessed when you withdraw cash against your credit limit.
• Introductory APR: The interest rate assessed on purchases when you first open a card, usually as part of a promotion. Many cards offer low intro APR promotions.
• Penalty APR: A higher interest rate assessed on late payments.

Credit cards frequently advertise a variable purchase APR, which reflects the range of APR you might receive depending on your creditworthiness and a benchmark index, like the U.S. prime rate. Some credit cards also offer fixed rates that are determined by your creditworthiness.

How do you know if you have a good APR?

A “good” APR may be one that is below the national average, but remember, your APR may lower as your credit score improves. A good APR also depends on how you use a credit card. For example, if you want to do a balance transfer, you want to find the lowest rate possible. If you’re getting a new card, it’s worth exploring low intro APR options.

APRs are subject to change, so it may be worth checking your credit card APR every few months.

How can you qualify for a low APR?

The best way to qualify for a low APR is by managing your credit responsibly. Here are some tips to help:

• Pay your statement balance in full every month: Paying your balance in full and on time helps build a strong credit history, which may have a positive impact on your score.
• Pay down high-interest debt: Creating a payment strategy for high-interest or bigger debts may help you reduce how much interest you pay and build your credit through regular payments.
• Stick to a budget: It could be tempting to spend up to your credit limit, but doing so is a negative signal to credit reporting agencies. A lower credit utilization ratio — the amount of credit you use compared to how much you have — signals responsible credit management and could help improve your score.
• Don’t open too many accounts in a short time: If you open several credit cards or apply for multiple loans in a short period of time, it could have a negative impact on your credit.¹ A good way to use your credit card wisely is to stick to one or two that directly support your current needs.

Save money with a lower APR

You may avoid interest charges by paying your credit card statement balance in full every month, but sometimes that’s not possible. By building a strong credit score, you could secure a good credit card APR that’s below the national average. A lower APR could save you significant money if you carry a balance, make a balance transfer, or use your credit card for a major purchase.