Your interest rate is the price you pay when you borrow money. For credit cards, interest rates are usually expressed as an annual rate, known as the Annual Percentage Rate (APR). This number depends on several factors – card type, credit score, income, payment history, and more.
Making a goal of paying off your balance in full each month can save you money over time by avoiding the additional interest costs. However, if you know your APR and opt for a card with a lower APR, you can save money if you need to carry a balance.
Average credit card rates
Your APR varies depending on the card type and your risk profile. Typically, better credit means access to a better (lower) APR. Rewards credit cards are slightly different from other cards in that they typically carry a higher interest rate because they offer cardholders more value than plain credit cards.
Here’s a look at how your APR might spread across different card types, according to CreditCards.com Weekly report on credit card rates.
Credit Card Interest Rate vs. APR
When you borrow money, the interest rate is not always the same as the APR. An interest rate represents the cost of borrowing money from a lender. You see it as a percentage calculated on the principal loan amount. In the case of a credit card, this would be the entire card balance. APR shows you the big picture.
The APR includes not only the interest rate, but also some other costs – like lender fees, closing costs, and insurance. Luckily, credit cards don’t typically charge these kinds of fees, so your interest rate and APR will likely be pretty similar. The difference between the APR and the interest rate is usually more noticeable for loans such as mortgages.
Still, it’s worth taking a look inside the Schumer Box. This is the chart that credit card issuers need to include in their fine print, and it gives you the 411 on credit card interest rates and fees.
Types of Credit Card APRs
APRs can fall into a few different buckets. Here’s an overview of some different APR types to know about:
- Fixed APR: The issuer of your card doesn’t change your APR based on the prime rate – that’s the rate that banks use as a basis for setting interest rates on different types of loans and lines of credit. That doesn’t mean your rate can never change. For example, late payment may trigger a higher APR, but your issuer must notify you first.
- Variable APR: Floating APR means your APR can fluctuate based on various events, including missed payments, an expiring introductory offer, a decline in your credit rating, or a change in the base rate. However, your issuer must inform you at least 45 days before the increase.
- Buy APR: The rate applicable to your purchases. It only applies to balances that you keep from month to month; If you pay your entire statement by the due date, you will not be charged any interest.
- Credit Transfer APR: The rate applicable to funds transferred from loans or other credit cards to the relevant credit card.
- Introductory APR: A low, or often 0 percent APR, that credit card companies offer new applicants for a period of time after an account is opened.
- Cash advance APR: This rate applies when you use your credit card to withdraw money from an ATM or bank.
- penalty APR: If you miss a due date, this rate could replace your regular APR. This rate is more extreme than typical APRs (can be as high as 29.99 percent) and can be lowered to the standard rate after six months of timely payment.
Tips to lower your APR
Achieving a lower APR generally requires excellent credit. But if you don’t fall into this category, there are still a few ways you can get in your lender’s good graces. If you don’t automatically qualify for a lower APR, you can consider the following steps.
- Compare cards beforehand: If you pay close attention to the fine print and opt for the card with the lowest APR, you can save tons in the long run. So take your time and look around before settling on a particular card.
- Improve your credit score: By clearing your balances and consistently making payments on time, you can improve your score and qualify for a lower APR.
- Take advantage of 0 percent introductory offers: Consider transferring your balance to a card with a 0 percent introductory promotion. This could help you save on interest while paying back your balance.
- Negotiate with your issuer: Asking for a lower APR can go a long way if you don’t already qualify for one. Call your credit card issuer and ask. They might agree to lower your interest rate to keep you as a customer.
Frequently asked questions about credit card interest rates
- What score do you need to get the lowest APR? If your FICO score is above the 670 mark, your credit rating is considered “Excellent,” meaning it is good or better. That means you’re entitled to some of the lowest interest rates around. As your score moves into the very good (740-799) and excellent (800-850) ranges, you are more likely to receive good APR offers from lenders on your credit card.
- What is considered a good APR? In any case, below the average credit card interest rate, which is currently around 16 percent.
- Which cards tend to offer the lowest APR? Here are some of our recommendations for the best low-interest credit cards from our partners.