What Is a Good APR for a Credit Card?

When you apply for a credit card, you should consider its annual percentage rate (APR), which determines how much you'll have to pay if you carry a balance.

So, what is a good APR? While this question may seem simple to answer, the reality is that most credit cards have different APRs depending on what you use the card for. But you can generally consider good card rates to be below the 21.51% national average reported by the Federal Reserve (as of May 2024).

Read on to learn how your card's APR works and how to know if the card you're using or applying for has a good rate.

Key takeaways

• The average APR on credit cards was 21.51% as of May 2024, according to the Federal Reserve.
• If your APR is below the average, it's a good APR.
• You may have a different APR for certain transactions, such as cash advances and balance transfers.
• Cardholders can sometimes get special low promotional APRs.
• Managing debt wisely and improving your credit score could also help you qualify for better APRs.

What is a credit card APR?

When you borrow money using a credit card, you’ll owe interest on your purchases if you do not pay off the balance in full by the statement due date. Interest is the cost of borrowing and is expressed as a percentage of the amount you borrow.

Knowing your card’s APR gives you a clear picture of the interest rate you’re paying each year. And that’s critical to know if you need to carry a balance for any reason.

Common APR types

Credit cards sometimes have complicated terms and conditions. Since you can do different things with your cards, your APR will vary depending on the transaction.

This example of a credit card agreement from Bank of America shows just how many different APRs there are.

Here's what each APR means.

• APR for purchases: This is the rate you pay for routine purchases on your card. If you charge your groceries, vacation, new shoes, or anything else and don't pay the card balance off in full, this is your APR.
• APR for balance transfers: Credit card companies often allow you to transfer a balance from one card to another. The balance transfer APR might be lower than the purchase APR to tempt you. This is the rate you'd pay on that transferred debt.
• APR for cash advances or direct deposit: Many cards allow you to access cash directly through a cash advance or direct deposit. Instead of charging a purchase on the card, you'd get the money directly. The APR is usually higher on cash advances.
• Penalty APR: If you’re late making a payment, your card issuer can impose a higher penalty APR for a limited time or indefinitely.

You can find credit card terms and conditions online or ask your creditor to provide them. When searching for the best credit cards, you can — and should — review these documents.

Some card companies also offer special promotional APRs to encourage you to become a customer. For example, a card might offer a 0% introductory rate on balance transfers or an introductory rate of 0% on purchases for new cardmembers. These promotional rates have a set endpoint, after which the standard APR will apply.

How it differs from an interest rate

Your credit card interest rate is just the amount the creditor charges on your outstanding balance. While an APR would normally consider the interest plus any lender fees, the APR for a credit card is usually the same as the interest rate since cards don't charge the same kinds of fees that other debts do. Still, always look carefully at your credit card terms and conditions to find out how the creditor calculates your rate.

Here's the basic formula for calculating your credit card APR.

((Interest charges ÷ borrowed amount) ÷ Number of days in billing period x 365) x 100

Let’s look at an example.

Say you charge $4,000 to your credit card, which has a 31-day billing period, and your creditor charges you $100 in interest that period. In this case, your APR would be around 29.44%. Since there aren’t fees included in this calculation, your credit card interest rate would also equal 29.44%. But if this were a traditional loan with fees, the APR would differ.

What determines your APR?

Many factors can impact your credit card rate APR, including:

• Current economic conditions: In a tight credit market with high demand, creditors may charge higher APRs.
• The prime rate: The prime rate is based on the federal funds rate (the rate set by the Federal Reserve at which banks can borrow from each other). Banks typically add around 3% to the federal funds rate to calculate the U.S. prime rate — the benchmark that financial institutions use to decide how much interest to charge customers.
• Borrower credit factors: Creditors consider borrowers with higher credit scores a lower risk because their past responsible behavior suggests they're less likely to default on debt going forward. They may offer such borrowers better APRs due to less risk.
• Card type and issuer: Card companies can have different policies for setting rates and terms. The best low-interest credit cards may have much lower rates than other cards that focus less on keeping their APRs low and more on providing other customer benefits.
• Transaction type: The transaction type matters a great deal because, as mentioned above, the APR differs for purchases versus cash advances or balance transfers — and promotional rates are sometimes available.

What is a good credit card APR?

According to the Federal Reserve, the national average credit card APR was 21.51% as of May 2024. If your card is offering a rate at or below the national average, you have a good credit card rate.

The best APRs are available when you take advantage of a 0% promotion, such as a balance transfer offer or an introductory purchase APR. However, you’ll be paying the card's standard APR, which may not be competitive, when the promotional rate ends.

On the other hand, certain types of cards are known to be expensive, such as retail store cards and cards for people with bad credit.

How to qualify for a good APR

If you want to get the best APR, you can take some steps focused on improving your credit score. Borrowers with good or excellent scores usually qualify for the lowest advertised rates.

You can improve your credit standing by:

• Always making payments on time
• Keeping accounts open so you have the longest possible average age of credit
• Using a mix of credit types to show you can manage diverse debts responsibly
• Reducing your debt balances to ensure you aren't using more than 30% of your available credit
• Becoming listed as an authorized user on someone else’s account in good standing, as this account will show up on your credit history
• Checking your credit report for errors to correct before they hurt your score

How to find low-interest credit cards

Beyond improving your own credit, you can take some of these steps to find low-interest cards.

• Compare options: Always shop around for low-interest credit card options, especially if you have good credit. You can compare rates and terms online to make this process easy.
• Consider smaller banks and credit unions: The Consumer Financial Protection Bureau found that smaller banks and credit unions generally charge lower rates compared to big banks.
• Look for promotional offers: Cards offering the best promotional details can keep your borrowing costs very low but read the fine print.

Here are a few low-interest cards to check out during your search.

• Wells Fargo Reflect^® Card(Rates and fees): This card has one of the best promotional rates out there. It offers a 0% intro APR on purchases for 21 months from account opening and a 0% intro APR on qualifying balance transfers for 21 months from account opening on qualifying balance transfers. That's nearly two full years during which you won’t pay the standard APR of 17.49%, 23.99%, or 29.24% Variable on purchases or 17.49%, 23.99%, or 29.24% Variable on balance transfers. You can also enjoy other cardholder benefits, including 24/7 roadside assistance, up to $600 in cell phone protection (subject to a $25 deductible), and a $0 annual fee.
  
  

  Read our Wells Fargo Reflect review

• U.S. Bank Visa^® Platinum Card: The U.S. Bank Visa Platinum Card also offers a 0% intro APR on balance transfers for 21 billing cycles before you return to the regular APR, which ranges between 17.99% to 28.99% (Variable). You'll also enjoy benefits such as free access to your credit score so you can monitor it for changes, identity theft protection, and up to $600 in cell phone coverage.
  
  

  Read our U.S. Bank Visa Platinum review

• Citi^® Diamond Preferred^® Card: Citi's card offers a 0% intro APR for just 12 months for purchases (then 17.49% - 28.24% (Variable)), but it does provide a 21 months 0% intro APR offer for balance transfers (then 17.49% - 28.24% (Variable)). There's a $0 annual fee, and you'll gain access to Citi Entertainment, which could make landing tickets to concerts and events easier.
  
  

  Read our Citi Diamond Preferred review

How to lower your existing rate

If you have an existing credit card with a higher APR than you’d like, you have some options to try to get your rate lowered.

One of the best ways is to try to negotiate with your card company. While card issuers don't have to agree to lower your rate, they might if you call them and ask — especially if you've generally paid on time, been a good customer, and used your card regularly. It may take you a few phone calls to find someone willing to work with you, but it's worth the effort if you can save on interest charges.

You can also look into a balance transfer deal to move your current debt onto a new card with a 0% intro APR offer. Just check for balance transfer fees and plan to pay off your transfer before the promotion expires.

Tips for minimizing interest charges

Finding a credit card with a low APR is a good idea if you are going to carry a balance. However, if you don't ever do that, then your card’s APR may be less important. You can avoid interest charges entirely by simply:

• Paying your balance on time and in full by the date specified on your bill. If you pay off the balance, your creditor won’t charge you interest. You essentially get an interest-free loan for about a month on things you charged early in the billing cycle.
• Avoiding certain transactions. For example, you'll want to steer clear of cash advances that usually come with fees and high rates.

I’ve charged thousands of dollars monthly on my credit cards for decades, and I've never paid a dime of interest. I don't even know what my card's APR is because I know I won't be paying it.

I won't take a cash advance since I have an emergency fund, and I've set up autopay for the full payment due so there's no chance I won't pay back the bill in full before interest charges could hit.

If you want to do the same, aim to set aside some money for emergencies so you don't have to rely on your cards. Also, ensure you have a budget that makes sense to keep your spending under the amount you can pay for each month.

FAQ

Is a 20% APR too high?

A 20% APR on a credit card is actually a little bit below the 21.51% national average rate. Still, paying that much for borrowing money is a steep price. Rather than getting hit with these high costs, aim to limit your spending to the amount you can pay back in a single billing cycle so you don't have to carry a balance.

Can creditors raise my APR?

Creditors can raise your APR. Most credit card companies charge a variable rate, so if the financial index tied to it increases, your card’s rate could go up without notice. Your rate can also increase if you’re late making your payment and the card company authorizes its penalty APR or if a promotional period expires.

Why is my APR so high even with good credit?

Except for promotional offers, credit card APRs tend to be high regardless of having good credit. Credit cards are often unsecured debts, meaning lenders have nothing besides your guarantee to ensure repayment. That makes them riskier, so the APR will be higher than for secured loans such as mortgages.

Bottom line

If you carry a balance on your credit card, a good APR should be the most important factor when you compare card options. While earning rewards is nice, the cost of a high rate can be higher than the value of any points, miles, or cash back that might be available, so your rate needs to be your first focus. You should also consider paying balances in full to avoid interest altogether.

Start shopping around for a low-interest card today, or check out five creative ways to lower your APR so you can save.

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Rates and fees

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Card Details

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• Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months.
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• 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers. 19.49%, 24.49%, or 29.49% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5.
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