Credit card annual percentage rates, commonly known as APRs, determine how much you’ll pay in interest if you carry a balance on your credit card. Your card’s APR can vary depending on a few different factors, and there can be different types of APRs for each card. Consider your card’s APR when shopping for a new credit card or negotiating rates on a current credit card.
Why Your Credit Card’s APR Matters
It’s best to not carry a balance on your credit card so you can avoid interest charges, but more than 25% of rewards credit card holders carry a balance at least seven times each year, according to a 2018 survey from U.S. News. If you carry a balance on your credit card, having the lowest APR possible can save you money, so it’s a good idea to shop around for the best rate.
If you carry a balance on your credit card, interest charges can add up quickly. As interest charges accrue, they can make balances grow larger and more difficult to pay down.
On a $1,000 balance paid over six months, you’ll spend about $47 on interest if your card has a 16% APR. If you have the same balance but a 20% APR, you’ll pay about $59 in interest over the same period.
Although the difference may be small in the short term on a small balance, it is more significant in the long term with a larger balance. For example, a $10,000 balance with an APR of 16% paid off over two years will cost about $1,750 in interest. The same balance at a 20% APR will cost about $2,215 in interest.
Current Credit Card APR Averages
If you know the average APR for the type of credit card you’re considering, you can recognize a good offer when you see it. Use this chart to compare credit card APR offers with the average minimum and maximum APR of credit cards in the U.S. News card database. The average APR for all cards in the U.S. News database is 15.58% to 22.83%.
|Type of rewards card||Average minimum APR||Average maximum APR|
|5% cash back||15.45%||23.56%|
|Type of card||Average minimum APR||Average maximum APR|
|No balance transfer fee||20.26%||23.57%|
|Starter cards for building credit||17.9%||21.99%|
|No annual fee||15.34%||23.04%|
Types of Credit Card APRs
Credit card APRs can be fixed or variable, though most credit cards have a variable-rate APR. There are also different APR rates that apply depending on how you use credit.
- A fixed APR is locked in when you sign up for your credit card and will not change, except under circumstances detailed in your terms and conditions. For example, if you make a late payment, you may trigger a penalty APR.
- A variable APR can change over time and is usually based on a benchmark rate. For example, a credit card might set its APR to the prime rate plus 3.5%. When the prime rate increases or decreases, so will your credit card’s APR.
- Your purchase APR is the standard APR that applies when you make purchases.
- Some credit cards offer an introductory APR, which is typically 0% and can apply to purchases, balance transfers or both for an introductory period. Usually, introductory APR periods range from 12 to 18 months.
- A penalty APR may apply when your payment is more than 60 days late or you’ve had a returned payment. Penalty APRs are typically higher than your purchase APR. However, your issuer is required to review your account at least every six months to determine if your APR can be lowered after a good payment history.
- A cash advance APR applies when you cash a credit card check or use your credit card to withdraw cash from an ATM. Cash advance APRs apply immediately without a grace period, are typically higher than purchase APRs and a cash advance fee may apply to each cash transaction.
- Although you may be able to get a balance transfer APR at 0% for an introductory period, not all cards have them. Some cards have an additional APR set for all balances transferred to the account.
Lowering Your Credit Card’s APR
Credit card issuers compete on many factors, and your APR is one of them. You can use this to your advantage whether you’re shopping for a new card or maintaining an older credit card account. If you need to carry a balance, it’s a good idea to do whatever you can to lower your card’s APR.
Compare credit cards. Whatever your goals are for using a credit card, you typically have at least a few choices with similar features. When you’re shopping for credit cards, compare each card’s APR in addition to other features.
“Know your credit scores before you apply,” says Gerri Detweiler, education director for Nav, which helps small businesses build credit. “Credit scores will be one of the biggest factors in determining the rates for which you qualify. These days, you can usually find out which credit score an issuer is likely to check before you apply.”
Seek out 0% introductory APR offers. Many cards offer a 0% introductory APR, which can allow you to avoid interest charges on purchases or balance transfers during the introductory period. If you have a balance to pay down or plan to make a large purchase that you need to pay off over time, a 0% introductory APR can be useful.
Choose a low-interest credit card. Another option for carrying a balance is a dedicated low-interest credit card, which can offer lower interest charges in the long term rather than an introductory period. This type of card may not earn excellent rewards, so you could use it specifically for balances you need to carry and not necessarily as a rewards-earning credit card.
Although Detweiler doesn’t think it’s necessary to shop for a credit card with a low APR if you plan to pay in full each month, she says it’s great to have a card with a low APR so you don’t have to shop around for a new one if you unexpectedly need to carry a balance.
Call your issuer to negotiate your rate. If you’re an existing cardholder, talk to your issuer and ask for a lower rate. It may say no, but if it says yes, you could save significantly on interest charges each month. You may have a stronger case for negotiation if you can point to an excellent payment history, you’ve had the card for a long time or other similar cards have a more competitive rate, so do some research before you call.
“If you opened the card and now have better credit scores, call your issuer and ask for a reduction,” says Ulzheimer. “They may or may not honor that request, but they definitely don’t want to lose you as a client. While you’re at it, ask for a higher credit limit. You might as well improve that aspect of the card as well.”
Pay your balance on time. The best APR is one you never have to pay at all. Your credit card’s APR doesn’t matter if you pay your balance on time and in full each month. Manage your spending so you’re not charging more than you can afford to pay during each billing cycle, and set up automatic payments and reminders so you’re less likely to forget about making a full payment on time.
Credit Cards With the Lowest Minimum APRs
Some of the card offers on this site are from companies who are advertising clients of U.S. News. Advertising considerations may impact where offers appear on the site but do not affect any editorial decisions, such as which card products we write about and how we evaluate them. This site does not include all card companies or all card offers available in the marketplace.