What’s a good APR for a credit card?

Arguably, the most important factor of a credit card is its annual percentage rate (APR). The APR for a credit card is the interest you pay for carrying a balance. A good APR is relative, but being at or below the current average is best. It’s easy to want a credit card with attractive rewards or a generous welcome bonus, but an APR can significantly impact your budget, even if you carry a short-term balance. What qualifies as a good APR depends on your credit profile, type of card, and interest rate trends. This guide explains what a good APR for a credit card is, how lenders determine rates, and ways you can qualify for a lower rate.

What is considered a good APR for a credit card?

To understand what a good APR for a credit card is, you need to know where rates currently stand. Staying at or below the average is helpful.

Current average credit card APR

The current average rate sits above 20%, according to the most recent CardRatings.com survey data. This average includes borrowers with excellent credit to those with subprime credit, so rates can vary widely.

Many credit cards will fall within a tight range, close to the average rate, but specific rates differ by issuer and borrower profile. Just because the rate is average doesn’t mean it’s good. It covers a wide range of risk-based pricing.

What is a good vs. bad APR?

It’s essential to know how rates compare when considering a new credit card. “In today’s environment, a good APR would likely be anything under about 20% because that is better than average. Right now average would be something in the low to mid 20’s, likely between 22% and 25%. Sadly, something over 25% is becoming more common for mainstream credit cards,” says Bobbi Rebell, consumer finance expert at BadCredit.org.

Interest rates are fluid, so context is key. What may be considered good now might have been too high several years ago.

 ➤  LEARN MORE:Low APR or rewards: Which is better?

Good APR ranges by credit score

When asking yourself, “What is a good APR for a credit card?” remember that APRs vary. Your credit score and profile play a key role in the offer an issuer extends.

Excellent credit (720+)

People with excellent credit are traditionally viewed as low-risk by banks. Having a credit score of 720 or higher qualifies you for the lowest APR on most credit cards. Expect rates to be around 20% or lower.

There’s one caveat to consider. Premium cards often have a higher APR to counterbalance benefits.

Good credit (670-719)

A credit score of 670-719 is considered good credit. You won’t get the best APR on a credit card in this range, but expect rates of 20-25%, depending on the issuer and your profile.

Slight improvements can benefit you in this range. Even a modest increase in credit score can lead to lower future APRs.

Fair/poor credit (<670)

A credit score under 670 is considered fair to poor, depending on the exact score. You can expect to see an APR of 25%+ with a credit score under 670.

Borrowers with fair to poor credit are generally considered higher-risk, so issuers cover that by offering higher APRs. You will have limited access to average APRs in this range, so it is important to repay balances in full each month.

 ➤  LEARN MORE:What is a good credit score?

Types of credit card APR you should know

APRs aren’t one number; issuers have multiple rates depending on how you use their cards. Here are common types of interest rates to understand.

Purchase APR

Purchase APR is the headline rate. It’s the rate issuers apply to purchases you make when you carry balances beyond the grace period.

The purchase APR is what’s most meaningful to users, as it’s typically highlighted in offers.

Introductory (0%) APR

Introductory promotional rate offers let users temporarily carry balances without interest. Terms vary, but can be up to 18 or 21 months. Such offers can help finance a large purchase.

It’s vital to repay balances before the promotional period is over. Unpaid balances can accrue interest at a standard rate.

Balance transfer APR

Balance transfer APRs apply to balances moved between cards. APRs on balance transfers are often temporarily 0%, albeit typically with a 3-5% transfer fee.

Aside from the fee, balance transfer APRs are similar to introductory 0% APRs.

Cash advance APR

Cash advance APRs can be significantly higher than a purchase APR. Worse yet, there’s no grace period, and interest accrues immediately.

Getting a cash advance is one of the most expensive ways to use a credit card.

Penalty APR

Penalty APRs are often 29.99% or higher, and can hit an account when you miss payments for 60+ days or violate the terms and conditions. The penalty can be on an account for at least six months.

“Penalty APRs, which can be over 30 percent and typically cost consumers the most, can often trigger a very expensive downward debt cycle that can be financially devastating,” notes Rebell. Avoid this if possible.

 ➤  LEARN MORE:What is variable APR?

How credit card APRs are determined

Multiple factors go into determining a credit card APR. Fundamentally, the prime rate plus the issuer’s margin serves as a benchmark for APRs, according to the Consumer Financial Protection Bureau (CFPB). Your credit score, history, and profile matter, too.

Relationship matters as well. “Some less obvious factors that can influence the APR an issuer offers might include the relationship with the issuer. The reality is that connections matter and financial institutions want to treat their best customers well,” adds Rebell.

The type of card you choose can also influence APRs. APR isn’t always merely about your credit score or prime rate. Selecting the right card and having a good relationship with the influencer can affect APRs.

 ➤  LEARN MORE:How does the Federal Reserve impact credit card interest?

How to qualify for a lower APR

Although you can’t dictate market rates, you can take steps to improve your creditworthiness.

Improve your credit score

Consistent, long-term behavior is the best way to boost your credit score. Focus on making on-time payments, limiting hard inquiries, and maintaining older accounts to improve your score.

Over time, the combined strategy should help raise your score to over 720, making you eligible for the best APRs.

Maintain low credit utilization

How much of your available credit you’re using is the second-largest factor in a credit score. Keeping your credit utilization under 30% is best. “Getting even lower, like 10%, would be ideal and can really make a difference,” says Rebell. “Actions to lower utilization are impactful. The biggest bang-for-your-buck move you can make in a short period of time is to improve your credit utilization,” he adds.

Make on-time payments

Payment history is the most important factor in your credit score. Missing one payment can result in higher APRs.

Automating payments can be a powerful way to avoid missing payments.

Look for 0% intro APR offers

Using a 0% intro APR card can be a helpful way to get relief from credit card interest, but only if you use it for planned purchases or debt consolidation.

It’s best to have a clear payoff strategy when using a 0% APR card. And pay it off before the promotional period ends.

 ➤  LEARN MORE:Best 0% APR credit cards 

When APR actually matters (and when it doesn’t)

A good credit card APR matters when you carry a balance. Slight differences in rates directly impact how much interest you pay over time. If you’re making large purchases or have ongoing revolving debt, APRs become more important to consider. Ignoring APR and wise credit practices can lead to a cycle of debt.

However, if you regularly make on-time payments, pay off your balance in full each month, and limit your hard inquiries, APRs are insignificant. For some people, APR is of utmost importance; for the wise user, it’s secondary to rewards or other features. Improving your credit score, requesting a rate reduction, or reducing your balances are impactful ways to lower a credit card APR.

Final thoughts on choosing a good credit card APR

Getting a good APR is relative, and the rate itself isn’t a fixed number. APRs depend on your credit profile and current interest rate climate. The most effective way to minimize the impact of APRs is behavioral. Improving your credit and avoiding balances can directly benefit you, and focusing on that will help you get competitive APRs in the future. The best APR is one that aligns with your credit usage, and that may not always be the lowest advertised number.

Frequently asked questions

Understanding how to get a good APR for your credit card is helpful. Here are common questions people have when considering a new card.