A credit card’s APR, or annual percentage rate, quantifies the cost of taking out credit. In other words: if you carry a balance beyond your credit card’s grace period, your APR will determine the amount of interest the card issuer can charge on that balance. Currently, the average credit card APR is 17.41 percent.
If you want to know whether a credit card has a good APR, compare it to the average credit card interest rate. If the card’s APR is below the national average, that’s an excellent APR. Even a credit card at the national average is a good option, especially if you’re looking at a top rewards credit card that includes other bonuses and perks. However, try to avoid credit cards with APRs that are significantly above the national average. If you carry a balance on those cards, you could end up paying a lot of money in interest.
What’s a good credit card interest rate?
While it’s easy to say that you should always look for credit cards that offer APRs at or below the national average, finding a good credit card interest rate can be a little more complicated. People with below-average credit scores will often be offered higher interest rates than people with good or excellent credit. This means that a good credit card interest rate for a person with fair credit is different from a good interest rate for a person with excellent credit.
When you’re comparing credit cards, take a look at each card’s APR range. If you were evaluating the top travel credit cards, for example, you might notice that the Capital One® Venture® Rewards Credit Card offers a variable APR of 17.24 to 24.49 percent and the Discover it® Miles card offers a variable APR of 13.49 to 24.49 percent. The Discover it Miles card offers a lower APR at both the low and the high ends of the range — and if you’ve got the kind of credit score that can earn you a 13.49 percent APR, you’ll be doing a lot better than the national average.
You’ll also want to check whether the credit card comes with an introductory APR on purchases and balance transfers — for example, the Discover it Miles card offers a 0% introductory APR for 14 months on purchases (13.49 to 24.49 percent variable thereafter) — and whether you’ll get stuck with a penalty APR if you miss a credit card payment.
How to get a good APR
The best way to get a good APR is to practice good credit habits. The better your credit score, the better interest rates you’ll be offered. Here are some actions you can take right now to improve your score:
- Make all of your credit card payments on time, every time. Payment history makes up 35 percent of your credit score, so make sure you’re maintaining a good one.
- Avoid maxing out your credit cards. Keeping your balances low will improve your credit utilization ratio and help boost your score.
- Pay off as many of your outstanding balances as possible. Work towards becoming debt-free.
As your credit score improves, look for credit cards with low interest rates. You can also contact your current credit card issuers and ask them to lower the interest rates on your credit cards. Credit card issuers don’t want to lose cardholders, so learn how to negotiate lower interest rates. In some cases, all you have to do is ask.
How to avoid credit card interest
If you want to avoid paying credit card interest, try not to make purchases that you can’t pay off within your credit card’s grace period. In other words: don’t carry a balance from month to month, and you won’t get charged interest. As long as you pay off your credit card balance in full every time, you can use credit interest-free.
That said, many of us carry a balance now and then — and sometimes, those balances can compound into serious credit card debt. If you want to pay off that debt while avoiding credit card interest, consider a zero interest credit card or a balance transfer credit card. These credit cards allow you to transfer old balances and pay them off during an interest-free period. Look for a zero interest or balance transfer card that gives you at least 12 months of zero percent APR on balance transfers, and then work on transferring your existing balances and paying them down. The Citi Simplicity® Card, for example, offers a 12-month introductory zero percent APR on new purchases and 21 months of zero percent APR on balance transfers (for balances transferred in the first four months of account opening), followed by a variable APR of 16.24 to 26.24 percent.
The bottom line
A good APR for a credit card is at or below the national average. However, a good APR for you might depend on your credit score. Work on getting your score as high as possible to gain access to credit cards with lower interest rates. If you want to avoid paying credit card interest, balance transfer credit cards can help you pay down your old balances interest-free — but the best way to avoid credit card interest is to never carry a balance at all.