Credit Card APR: What Is a Good APR For a Credit Card?
When it comes to choosing a credit card, there are a lot of different factors that go into it, but one of the most important ones is the APR. The APR, or annual percentage rate, is the interest rate that you will be charged on any balances that you carry over from month to month. A lot of people don’t realize that there can be a big difference in APRs from one card to another. For example, some cards may have an APR as low as 12%, while others may have an APR as high as 30%. So, what is a good credit card APR? Well, that depends on a few things. In this article, we will take a look at some of the factors you should consider when determining what a good APR is for you.
APR stands for annual percentage rate, and it’s the interest rate you pay on your outstanding credit card balance. The higher your APR, the more interest you will pay over the course of a year. Credit card companies typically charge between 12% and 30% APR. That’s why it’s important to shop around for a good deal.
There are a few things to keep in mind when shopping for a credit card with a good APR.
Interest rates can vary based on your credit score. If you have good credit, you should be able to qualify for a lower APR.
Also, some cards offer 0% APR introductory periods. This can be a great way to save money on interest if you plan on carrying a balance on your card. Just make sure you understand how the introductory period works before signing up for a card.
Balance transfer cards can also be a good option if you’re looking to save on interest. These cards offer 0% APR on balance transfers for a certain period of time, which can help you pay down your debt faster.
What Is a Good APR for a Credit Card?
Now that we have covered the basics let’s see what is a good APR for a credit card. A good APR for a credit card is one that is lower than the average APR for all credit cards.
The average APR for all credit cards is currently about 17%, so a good APR for a credit card would be anything below that. There are many credit cards available that have APRs below 17%, so it should not be difficult to find a good APR for your credit card that will give you lower interest rates. Just remember to shop around and compare APRs before you decide on a credit card.
Another thing to remember is that there is a credit card with a very high APR. It reaches 25%, and it is marketed as a helpful tool to build up your credit score. But there is a very big downside to it since it can put you in a never-ending cycle of debt.
Make sure that you do proper research and check if the APR you choose is a good fit for you.
How Is a Credit Card APR Determined?
Choosing a good APR is very important, but how does an ARP work, and how is it determined? There are a few things that go into determining APR on a credit card. The first is the prime rate, which is the interest rate that banks charge their most creditworthy customers.
This rate can change frequently, so your credit card APR may fluctuate along with it. Other factors that can affect your APR include your credit history and score, the type of card you have, and whether you’re carrying a balance on the card.
In other words, the APR you get is decided by a lender once you apply, and it’s going to be based on your credit rating and how good you are at managing your money. Once you apply for a chosen credit card, don’t be surprised to see that your ARP is higher or lower than the representative APR.
Types of Credit Card APRs
Understanding different types of APRs on credit cards can be a very helpful tool. Credit card APRs can be either fixed or variable. A fixed APR means that the interest rate will not change over the life of the loan. A variable APR means that the interest rate may fluctuate based on changes in the prime rate.
On top of that, there are a couple more types available. We will list them here:
- Purchase APR – The most common APR. With this APR, you will be charged for new purchases that you make with your card and that are not repaid in full before the grace period ends.
- Balance transfer APR – As the name already says, transfer APR allows you to transfer a balance from one card to another. You will be charged immediately, and you have no grace period.
- Introductory APR – You can find many cards that offer intro periods with 0% APR for a set period of time. With this type, you will carry a balance without occurring interest rate changes for a set period, but you will be required to make regular monthly payments.
- Cash advance APR – This type allows you to withdraw money from your credit card line of credit. It’s important to know that the APR on the cash advance is much higher than with purchases or balance transfer APR.
- Penalty APR – Once you miss your payment, your APR will go up. On top of your APR going up, in case you have 0%, you will lose it, and your credit score can take a huge hit.
Also, because there are many different types of credit card APRs available, it is important to compare rates before you choose a card. Some factors that you may want to consider when comparing rates include the following:
- The length of time the introductory rate will last
- The size of the balance transfer fee
- The annual fee
- The late payment fee
- The cash advance fee
How To Compare Credit Card APRs
When you are looking for a new credit card, one of the first things you should compare is the Annual Percentage Rate (APR). This is the interest rate you will have to pay on any balances you carry from month to month.
The APR can have a big impact on how much your credit card costs you over time. So it’s important to understand what APRs are available before you decide which card to apply for.
Here are some tips for comparing credit card APRs:
1. Know the current APR for your existing cards. This will help you compare new offers to see if they are better or worse than you already have.
2. Look for cards with 0% intro APRs. These offers can save you a lot of money on interest if you transfer a balance from another card and pay it off within the intro period. Just make sure to read the fine print, so you know how long the intro period lasts and what the regular APR will be after that.
3. Compare rates for different types of transactions. Some cards have different APRs for purchases, balance transfers, and cash advances. Make sure you know what the rate will be for each type of transaction before you apply.
4. Consider rewards when comparing APRs. Some rewards cards come with higher APRs, but the value of the rewards may offset the cost of interest over time. Make sure to do your math to make sure the rewards are worth it.
High Credit Card APR Advantages and Disadvantages
There are both advantages and disadvantages to having a high credit card APR.
Advantages of having a high credit card APR:
- Being able to make larger purchases without accruing interest
- If you pay your balance in full every month, you will not have to pay any interest at all
- A high credit card APR can act as a motivator to help you pay off your balance more quickly
Disadvantages of having a high credit card APR:
- Carrying a balance from month to month will accrue you interest charges at a higher rate than if you had a lower APR
- It can be more difficult to qualify for a high credit card APR if you have bad credit or no credit history at all.
Before making any decision, we do suggest you weigh out both the benefits and setbacks. In case you don’t do that carefully, you might end up in debt.
Low Credit Card APR Advantages and Disadvantages
Credit card APR is the interest rate you are charged on your credit card balance. It’s important to understand what goes into determining your credit card APR because it can have a big impact on your overall costs.
Advantages of having a low credit card APR:
- It can save you money on the interest rate
- You will pay less
- You can pay off debt faster
Disadvantages of having a low credit card APR:
- Limited availability of getting perks
- Can’t apply for this APR if you have a bad credit score
- Usually offered to high-net-worth individuals
As much as they can be a very good thing, low credit card APR has its own downsides also. We do advise you to do the needed research and compare if this would be more beneficial for you or not.
How to Qualify for a Good Credit Card APR
Let’s say you have good credit. There are a few things you can do to get a good APR on your credit card:
1. Shop around. Don’t just go with the first credit card offer you receive. Compare APRs from different issuers to see who can give you the best rate.
2. Negotiate. In case you have good credit, you may be able to negotiate a lower APR with your issuer. It never hurts to ask.
3. Use a balance transfer card. If you have existing debt on another credit card with a high APR, consider transferring that balance to a new credit card with a 0% Intro APR period. This will help you save on interest while you pay down your debt.
4. Pay your bills on time. One of the best ways to keep your APR low is by maintaining a good payment history. Paying your bills on time will help show issuers that you are a responsible borrower and deserving of a low-interest rate.
All of these are very useful tips that can help you get the best deal for yourself and your finances.
Getting the best deal on your credit in regard to the APR is very important. Not only can it damage your credit score if you don’t make your payments on time, but it can also put you in debt.
We made this article to help you understand better what your options are when it comes to the APR and how to get the best one. Just make sure you do your diligence before you choose a certain type.