What is a Good APR for a Credit Card? How Does it Work?

You may have seen the term APR, or annual percentage rate while shopping for auto loans, mortgages, or credit cards.

When it comes to credit cards, the APR is the interest rate a bank charges when a balance is carried on a credit card. Though APR is expressed as an annual rate, banks use APR to calculate interest charged on a month to month. 

In reading this, you would get to understand what a good interest rate on a credit card is, how to get a good APR for your credit card, how to qualify for a good APR on your credit card, amongst others.

Keep reading.  

Check Out: What is a Good APR on a Credit Card?

What is a Good APR for a Credit Card? 

A good APR for a credit card is your card’s finance charge expressed annually. This number is typically the biggest deciding factor in how much it will cost you to carry a balance on your credit card, making it important to know and understand how a good APR on your credit card works and why you need it.  

When your credit card is anything below 14%, it means you have a good APR on your credit card, which automatically goes to show you have good credit.

If you have excellent credit, you could qualify for an even better rate, like 10%. If you have bad credit, though, the best credit card APR available to you could be above 20%. 

A good APR for your credit card APR depends on several factors, including your credit score and the type of credit card. The average credit card interest rate for cardholders carrying a balance is 16.61%, according to a recent study on waiving credit card interest.

But that isn’t necessarily a good APR for a credit card, especially considering that the Federal Reserve interest rate is at historic lows. 

While it’s easy to say that you should always look for credit cards that offer APRs at or below the national average, a good purchase APR for you really depends on your credit score.

People with below-average credit scores will likely 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. 

Check Also: The Best Credit Cards With 0% APR AND 0% Interest

How to Get a Good APR for Credit Card?

Getting a good APR for your credit card entails getting a card with low interest rate. There are many ways to get a card with a low interest rate.

If you’re currently paying off debt or plan to carry a balance, lowering your interest rate is one of the most effective ways to save money.

Whether it’s working with your current issuer or opening a new credit card, you have a number of options. 

Here are some steps you can take to get approved for a low-interest credit card: 

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See Also: 9 Low APR Credit Cards For 2022 | Check Out The Interests

Negotiate with your Bank: 

Almost everything is negotiable, including your credit card APR. If you’ve
demonstrated that you can pay your bills on time, call your bank and ask if you qualify for a lower interest rate.

This is especially effective if your credit score has gone up since you originally joined. Be sure to mention your good credit score and history of on-time payments. 

Apply for a low-interest credit card: 

If calling your bank doesn’t work, shop around for a different credit card. There are plenty of great low-interest credit cards out there.

These are good to have on hand if you ever have to carry a balance. Just make sure you qualify before you apply. 

Get a 0% intro APR credit card: 

If you already have credit card debt and are paying a high interest rate on it (think 14% or more), consider a balance transfer credit card.

These credit cards offer a 0% intro APR on balance transfers for a limited period of time, allowing you to pay off your debt interest-free. Keep in mind that most of these cards do charge a balance transfer fee.

Also, if you don’t pay off your balance before the promotional period ends, you might end up with a higher credit card APR than you had before. 

Join a Credit Union: 

Sometimes credit unions offer interest rates even lower than those that come with low-interest credit cards from major banks.

That’s because credit unions are not-for-profit organizations that pass off their profits to members in the form of low fees and better interest rates on savings accounts and credit cards.

You do have to qualify to be a member, but often, joining a credit union is as simple as paying a small annual fee or living in a certain area. 

Don’t Carry a Balance: 

The best solution to avoid paying high interest fees is to avoid carrying a balance at all. Paying off your credit card bill in full every month will ensure that you don’t waste a cent on interest fees.

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 above 16 percent.

How to Compare Good APR for Credit Cards 

When you’re comparing credit cards, there are a lot of things that should be taken into consideration like the card’s APR range.

For instance, when comparing between Blue Cash Preferred card and the Chase Sapphire Preferred Card, you should be able to note that the lowest APR you can get with the Chase Sapphire Preferred is around the national average APR of 16 percent but it’s two percentage points higher than the lowest APR you can get with the Blue Cash Preferred.  

You should also want to check whether the credit card comes with an introductory APR on purchases and/or balance transfers.

The Blue Cash Preferred Card, for example, comes with 12 months of 0 percent intro APR on purchases (then 13.99 percent to 23.99 percent variable APR) but not balance transfers. The Chase Sapphire Preferred, on the other hand, doesn’t have any 0 percent intro APR offers.

It is also important to be aware of any penalty APR that may be applied if you miss a credit card payment. Both the Blue Cash Preferred and Sapphire Preferred may charge a penalty APR of 29.99 percent (variable). 

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These are factors you should really put into consideration
before choosing your credit card accordingly. 

How to Qualify for a Good Credit Card APR

The best way to get a good APR is to practice good credit habits. 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 it’s positive. 
  • Avoid maxing out your credit cards. Keeping your balances low will improve your credit utilization ratio. 
  • Pay off as many of your outstanding balances as possible. Work toward becoming debt-free. 

As your credit score improves, look for credit cards with low-interest rates. The better your credit score, the better interest rates you’re likely to be offered. 

How to Lower your Credit Card’s APR? 

There are two ways to lower your credit card’s APR. The first way to get a better APR on your credit card is by calling your credit card issuer and asking for a lower interest rate.

If calling customer service and asking for a lower APR makes you nervous, keep in mind that a Dec. 2020 survey from CreditCards.com found that 69 percent of cardholders who asked for a rate cut received one.

If you’re having trouble making your monthly payments, your issuer may consider you for a hardship program. Sometimes, you just need to ask. 

The other way to lower your credit card’s APR is by building your credit.

In some cases, lenders will offer better interest rates, including promotional 0 percent APRs, to their most creditworthy customers.

Even if your current credit card issuers does not lower your APR as a response to your newly improved credit score, you’ll be more likely to receive good credit card APRs when you apply for new credit cards or loans. 

How Your APR for a Credit Card is Determined? 

The APR assigned when opening a credit card is determined not only by an applicant credit score or report, but also the U.S. prime rate. The prime rate is used by major banks to set the rate on consumer loan products like credit cards.

Lenders take the prime rate and tack on additional margins to mitigate the risk of default and gain profits on unpaid balances in the form of interest. 

As of July 2021, the federal prime rate in the United States is 3.25%.

For borrowers with strong credit an APR of prime rate (3.25%) plus a lender’s margin of 10%, totally a 13.25% APR, might be typical for a new account. By contrast, a borrower with poor credit may pose a higher risk and therefore receive an APR of current prime rate (3.25%) plus the lender’s margin
of 20%- for a high APR of 23.25%. 

In addition to a borrower’s creditworthiness and the prime rate, lenders also examine financial records such as payment history, credit report and debt-to-income ratio (DTI) when determining a borrower’s APR.

Credit cards offering rewards like points, miles or cash back on purchases tend to charge higher APRs when compared to non-rewards cards. 

If you pay your credit card bill in full and on time each month, the APR you receive may be insignificant because only balances carried or cash advances accrue interest. It is generally a good idea to avoid ever carrying a balance on a credit card. 

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Types of Credit Card APR 

The majority of credit card companies offer various credit products that advertise a number of different types of APR.

If you read the terms and conditions of a credit card—something everyone should do before applying for a card—you’ll notice a range of different APRs.

Many credit cards have variable rates and understanding the different types of APRs offered is critically important when evaluating card options. 

Some of the most common credit card APRs include: 

Introductory APR or Promotional APR:

A lower rate (sometimes as low as 0%) offered to new customers for purchases or balance transfers on a limited-time basis.

Introductory offers can last from a few months to up to 20 months or more, after which the APR will increase to a variable rate based on cardholder creditworthiness. 

Purchase APR:

The rate applied when you make new purchases on a credit card and carry a balance forward into the next billing cycle.

This is the most common APR type you will come across with credit cards. 

Cash Advance APR:

The rate for using a credit card to withdraw cash from an ATM or bank.

The APR on cash advance transactions can be exorbitant and we do not recommend using your credit card for these transactions. 

Balance Transfer APR: 

The rate is applied when you move an existing debit balance on one credit card account to a different card account.

A balance transfer from one card with a high APR to a lower-rate card can be a smart way to eliminate debt faster. 

Penalty APR: 

The rate is applied to your card account when you violate your agreement by not making payments on time. Penalty APRs can reach as high as 29.99% if your payment is 60 days late. 

Frequently Asked Questions 

What if I try and still cannot get a good interest rate for my credit card? 

It’s very simple really, just look out for another card that could give you the features you are looking out for.  

What if I negotiate with my bank and I still cannot get a good APR for my credit card? 

If your bank does not accept the negotiation offer you threw to the table; you could always join a credit union to help you offset these debts. 

How do I know the best card to use to get a good APR for a credit card? 

In picking out a card, you should consider its lender’s rate, how the card is best used, your creditworthiness, and of course, the interest rate of the card.  

What interest rate is regarded as a good interest rate for a credit card? 

Once you have a lender’s margin of 20% and an APR of 23.25%, you can be regarded as having a good interest rate for a credit card.  

What is the best type of credit card APR? 

Introductory APR or promotional APR as the best credit card APR because it offers new customers purchases or balance transfers on a limited-time basis. 


Generally speaking, a good APR for a credit card is at or below the national average. A good APR for you, however, depends on your credit score.

Work on getting your score as high as possible to gain access to credit cards with lower interest rates.

I hope reading this has been helpful in ensuring you understand what a good APR for a credit card is and what a good interest rate for a credit card is.  


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