What’s a good APR for a credit card?
Key takeaways
- A good credit card APR is a rate that’s at or below the national average, which currently sits just below 20%.
- While there are credit cards with APRs below 10%, they’re most often found at credit unions or small local banks.
- If you don’t have good credit, you’re likely to receive a higher APR.
A credit card’s annual percentage rate (APR) is the fee you’ll pay for borrowing money with your card. If you carry a balance beyond your credit card’s grace period, your APR determines the amount of interest the card issuer can charge on that balance. Other transactions, like cash advances and late payments, are subject to their own APRs that might be higher than your regular rate.
If the card’s purchase APR is below the national average, that’s generally considered a good APR. The average credit card APR is currently just below 20%.
Even a credit card at the national average can be considered a decent option. However, while a 20% APR might be a good rate because it matches the current national average, you still want to try for an APR below that. Credit card interest is notoriously higher than that of other means of credit. If you carry a balance on your card, you could end up paying a lot of money in interest.
How is your APR determined?
When you apply for a credit card, the card issuer runs a hard inquiry on your credit report. The details of your credit history and the information you provided in your credit application inform what APR you are approved for.
Credit card issuers set their APRs by adding their profit margin (usually about 12% to 13%) to the prime rate. For context, the current prime rate is just under 7%. Much like other financing options, a good to excellent credit score will often secure a lower APR for a credit card than bad credit.
Different types of APR on a credit card
The purchase APR is just one type of interest rate you’ll need to consider with your credit card. You’ll also want to pay attention to the other APRs that could impact your credit card to determine a good APR for your credit card.
| Cash advance APR | This is the interest rate you’ll pay to get cash from your credit card. It’s often much higher than your purchase APR, typically around 29.99%. |
| Balance transfer APR | This is a temporary APR that spans the length of your balance transfer period before reverting to the standard variable APR. It only applies to any balances you’ve transferred, assuming you meet the issuer’s criteria, and may be revoked if you do not make on-time payments. |
| Introductory APR | This is an APR that only applies during a limited time before reverting to a standard variable purchase APR. This could be as low as 0% and can apply to purchases, balance transfers or both. |
| Penalty APR | A penalty APR only applies if you’ve made a late payment or have defaulted on your credit card. It’s typically the highest possible interest rate (around 29.99%). |
| Buy Now, Pay Later APR | This is a specialty APR for credit cards that offer this type of payment plan. Issuers like Chase, Citi and American Express each have their own version of this. It may be a fixed introductory APR for a short period or a variable APR specified in your credit card terms. |
How to calculate your APR
If you aren’t sure what the interest rate is for each of these different types of APRs on your card, one of the easiest ways to confirm your APR is by reviewing your credit card’s rates and fees document. When you open your account, your purchase APR, along with the cash advance and penalty APRs, should be listed in the Schumer box of the card’s terms and conditions.
You can also review your monthly card statement, call your issuer directly using the customer service number or check your card’s mobile app or website and look for account details.
Use this formula to calculate the interest applied to your account during a given billing cycle:
[daily rate] x [average daily balance] x [days in billing cycle] = credit card interest
Spending example:
Imagine you’ve completed a 31-day billing cycle, and you’re carrying an unpaid balance of $1,000 at an APR of 18%.
To find your daily rate, you’d first divide your APR by 365.
18% / 365 = .049%
To find your average daily balance, you’d then add the balance of your card after each day in the billing cycle and divide your balance by the number of days in the billing cycle. To keep it simple for this example, we’ll assume your balance was a flat $1,000 every day for the entire 31-day month:
$31,000 / 31 = $1,000
Finally, you’ll multiply your average daily balance of $1,000 by your daily rate of .049% and then the number of days in the billing cycle.
$1,000 x .049% x 31 = $15.19
In this scenario, you’d pay about $15.19 in interest for that billing cycle — but the longer it takes you to pay, the more interest will add up.
How to qualify for a good credit card APR
Your card’s APR depends on many factors, such as:
- Credit score
- Prior relationship with the issuer
- Federal Reserve’s prime rate
- Your age (if you’re under 21 years of age, you are more likely to face higher APRs on your credit cards)
Ultimately, however, getting a good purchase APR will depend most on your credit score. People with below-average credit scores tend to be offered higher interest rates than people with good or excellent credit.
If you want the best credit card APR possible, work on improving your credit score first, such as making sure you:
- Pay your credit card statement’s minimum payment on time, every time. Your payment history makes up 35% of your credit score, so make sure it’s positive.
- Don’t max out your credit cards. Keeping your balances low (experts recommend using below 30% of your total credit limit) can improve your credit utilization ratio, which affects your credit score.
- Pay off as much of your outstanding balances as possible. When you prioritize paying down existing debts, you avoid unnecessary interest, fees and penalties.
- As your credit score improves, look for credit cards with low interest rates that you can qualify for. And don’t hesitate to reach out to your existing card issuer to negotiate a lower interest rate if you see an improvement in your credit score.
The bottom line
Generally, a good APR for a credit card is at or below the national average — currently right below 20%. But the APR you ultimately get depends on your creditworthiness and credit history.
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