Your interest rate is the price you pay for borrowing money. For credit cards, interest rates are typically expressed as a yearly rate called the annual percentage rate (APR). This number will vary depending on several factors — card type, your credit score, income, payment history and more.
If you make it a goal to pay your balance in full each month, you can save money over time by avoiding the added cost of interest. Still, knowing your APR and opting for a card with a lower APR can save you money if you do have to carry a balance.
Average credit card interest rates
Your APR will vary depending on the card type and your risk profile. Typically, better credit means access to a better (lower) APR. Rewards credit cards differ slightly from other cards in that they typically carry a higher interest rate because they offer more value to cardholders than basic credit cards.
As of Sept. 21, 2022, the average credit card APR is 18.16 percent, according to Bankrate data. Credit card APRs have risen in tandem with a recent series of federal funds rate increases by the Federal Reserve that began in March:
|Sept. 21, 2022||18.16%|
|Sept. 14, 2022||18.10%|
|Sept. 7, 2022||18.03%|
|Aug. 31, 2022||17.96%|
|Aug. 24, 2022||17.85%|
|Aug. 17, 2022||17.67%|
|Aug. 10, 2022||17.58%|
|Aug. 3, 2022||17.42%|
|July 27, 2022||17.35%|
|July 20, 2022||17.25%|
Credit card interest rate vs. APR
When you’re borrowing 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’ll see it expressed as a percentage charged on the principal loan amount. In the case of a credit card, that would be the total card balance. APR shows you the bigger picture.
APR includes not only the interest rate, but some other costs, too — like lender fees, closing costs and insurance. Luckily, credit cards don’t typically charge those types of fees, so your interest rate and APR will probably be pretty similar. The difference between APR and interest rate is usually more apparent with loans, such as mortgages.
Still, it’s a good idea to take a look at the Schumer Box. That’s the table that credit card issuers are required to include in their fine print, and it gives you the 411 on the credit card’s key rates and fees.
Types of credit card APRs
APRs can fall into a few different buckets. Here’s a rundown of a few different APR types you should be aware of:
- Fixed APR: Your card’s issuer won’t change your APR based on the prime rate — that’s the interest rate that banks use as a basis to set rates for different types of loans and lines of credit. That doesn’t mean that your rate can never change. A late payment, for example, may trigger a higher APR, but your issuer has to notify you first.
- Variable APR: Variable APR means that your APR can fluctuate based on various events, including missed payments, an introductory offer expiring, a drop in your credit score or a change in the prime rate. But your issuer must give you notice at least 45 days before the increase.
- Purchase APR: The rate that applies to your purchases. It only applies to balances you carry from month to month; if you pay your entire statement balance by the due date, you won’t be charged any interest.
- Balance Transfer APR: The rate that applies to balances transferred from loans or other credit cards to the applicable credit card.
- Introductory APR: A low or often 0 percent APR that credit card companies will offer to new applicants for a certain time period after an account has been opened.
- Cash Advance APR: This rate applies when withdrawing money from an ATM or bank using your credit card.
- 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 interest rate after six months of timely payments.
Tips for lowering your APR
Scoring a lower APR generally requires excellent credit. But if you don’t fall into that category, there are still a few ways you can get into your lender’s good graces. If you don’t automatically qualify for a lower APR, here are a few steps you can consider taking.
- Compare cards beforehand. Paying close attention to the fine print and opting for the card with the lowest APR can save you tons in the long run. So take your time and shop around before settling on one specific card.
- Improve your credit score. Chipping away at your balances and consistently making payments on time can help you boost your score and qualify for a lower APR.
- Take advantage of 0 percent introductory offers. Consider transferring your credit balance to a card with an introductory 0 percent promotion. This could help you save money in interest while you’re paying down 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. It might agree to lower your interest rate in order to keep you as a customer.