What Is a Good Credit Card APR?

The APR (annual percentage rate) on a card will determine how much you pay to carry a debt on the card.

The APR is the cost of borrowing for a full year. The APR is used to calculate interest due on unpaid balances each billing cycle. Calculate your own interest on a credit card to see how much you will pay for carrying a debt.

What is a good APR for a credit card? You must first understand the APR calculation process to answer this question.

What is the effect of Prime Rate on Credit Cards?

Prime rate is the fluctuating rate of interest that banks use to determine their rates for many products including credit cards. The Federal Reserve website has the prime rates posted by most of the 25 largest U.S. Banks.

Jason Werner is an accredited investment fiduciary, and the founder of Werner Financial. He says that credit card companies base their APRs often on the prime rate. The prime rate is directly related to the APR of your credit card.

Credit cards have variable rates that are made up of an APR base plus the prime rate. Card issuers will use your credit score to determine the base APR.

Many banks base their prime rate on the Fed's federal funds target rate at least partially, even though the Fed doesn't set the rate.

What is a good APR on your credit card?

You want to compare credit cards and ensure that you are getting the best rate. What is a good credit card APR?

Chuck Czajka is a financial consultant registered in Florida and the founder of Macro Money Concepts. He says that many credit cards begin with an introductory low-interest or no-interest offer. This is usually only the first offer.

Comparing averages within the industry is one way to find out what APR you should be looking for. According to the Fed, as of February 20, 2023, the average credit card rate was 20.09% across all accounts.

You should be aware that APRs can vary depending on the credit card type you are considering. Rewards credit cards that offer extra perks may have higher APRs. According to U.S. News, the current average APR minimum for rewards credit cards stands at 20.28% and the average APR maximum is 27.81%.

APRs can also differ from person-to-person. Credit cards with the lowest APRs are usually only available to those who have excellent or good credit.

Credit cards may also have multiple APRs, which can make things even more confusing. You might, for example, be charged a different APR rate for cash advances and a different APR for purchases. If you fail to make a payment on time, the APR for your purchase may change to a higher penal APR.

Werner explains that it's important for card users to be aware of the different APRs, so they can decide which payment structure is best suited to their financial plans.

What credit cards have low APRs?

You'll need a FICO credit score of at least 670 to qualify for low APR credit cards. Lenders will start to consider you a prime borrower if your FICO score is 670 or higher. You will be more attractive to credit card companies if you have a high credit score. This shows that you pay your bills regularly and follow other good credit habits.

Werner says that "advantageous deals, such as 0% APR credit cards introductory for a certain period of time, or low-interest credit cards" are available to clients who have a good credit score and credit history.

Low-interest cards are less enticing than reward cards. What they lack in extras, they make up for with lower interest rates if you are the type who keeps a monthly balance. You may want to consider a rewards card if you are a responsible consumer and pay off your monthly balance.

What Credit Cards Offer High APRs

Werner explains that consumers with lower credit scores are more likely to be offered options with higher APRs. Some of these include retail store credit cards, secured credit cards, and secured credit cards.

Consumers with credit scores high enough to qualify for reward credit cards may still be subjected to APRs that are higher than normal. Interest charges can quickly wipe out the value of rewards if you carry a credit card balance.

How can you qualify for a good credit card APR?

You can qualify for a low APR on your credit card by proving that you are creditworthy.

Werner advises that to be able to access a card with a low APR, you must first build up a credit score.

Here are a few steps you can take to qualify for a lower APR on your credit card:

You can improve your credit score by paying on time, not opening too many cards at once to prevent multiple hard inquiries and using no more than 30% of your available credit. Negotiate a lower rate. Call your creditor and request a lower APR. It may not work every time, but you can always ask. Monitor your credit score. Keep your eye out for inaccuracies by routinely getting a free copy from each of the three major credit reporting agencies at AnnualCreditReport.com.

Werner says that by understanding and learning how to build and maintain a strong credit rating, an individual will have more options available when looking for a credit card or loan.