How To Compare Credit Card Aprs And Apr Offers
Consider these examples to see how APRs vary across categories. All the APRs listed here are variable and subject to change.
What to Expect with Better Interest Rates
What to Expect From Cards With Low APRs
Most low-interest credit cards offer little in terms of additional features. However, these cards allow you to save money if you plan to keep revolving balances in your accounts. If you get a card with a 0% APR offer, you get to pay no interest on outstanding balances during the promotional period. This may apply to purchases and balance transfers, typically from 12 to 18 months.
If you plan to pay your balances in full each month, you might be better off looking for a card that comes with added perks.
What to Expect From Cards With High APRs
You might need to pay a high APR if you have poor creditworthiness or if youre looking for a premium card. In the case of the former, your card might come with a high APR and still not offer additional benefits.
Premium cards that come with high APRs provide different types of benefits. These may include high reward rates, travel credits, airport lounge access, priority boarding, purchase protection and travel insurance.
If you plan to keep a revolving balance in your account from one month to the next, getting a card with a high APR might not work well for you as you could end up paying a tidy sum as interest over time.
What Is A Low Introductory Apr
A low introductory APR is a low interest rate, usually 0%, that runs for a certain amount of time, usually six to 15 months.
A low introductory APR can be used to consolidate credit card debt by transferring balances from high-interest cards or can be a way to make eligible purchases without paying interest on them.
The key is to pay off the balance before the introductory period ends. If you dont, youll pay interest at the regular APR. That counteracts any savings from the interest-free period.
Being charged 0% interest doesnt mean no payments are required during the intro period. Youll still have to make the minimum payment on time or risk having the 0% APR canceled. A penalty APR may be charged if you dont pay at least the minimum payment due.
Good Apr For A Credit Card Faq
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What A Good Credit Card Apr Looks Like
A good for a credit card is anything below 14% — if 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%. Even the best secured credit cards for building credit often have a credit card APR starting around 22.99%.
The highest credit card interest rates are usually found on:
Those with the lowest APRs tend to be low-interest credit cards and credit cards from credit unions. Some of the best low interest credit cards have a credit card APR range starting at 12% to 14%. Many popular credit unions offer credit cards with interest rates that start at 5.99% to 8% for their most creditworthy members.
READ MORE:Best Low Interest Credit Cards
For context, the average credit card APR across all credit card types ranges from 15.49% to 22.61% as of June 2020. Credit cards usually offer an APR range, rather than a single across-the-board rate for all transaction types.
A good way to improve your chances of getting approved for a low-interest credit card is to improve your credit score. Only consumers with an excellent qualify for credit cards with the lowest credit card APR.
|Time to pay off debt||3.9 years|
As you can see, having an 18% APR instead of a 10% APR tacks on more than seven extra months to your monthly payments and costs you $2,203 more in interest.
What Is An Annual Percentage Rate
The APR on a credit card represents the total cost of the loan expressed in annual terms. A credit cards APR includes the interest rate as well as any fees, including for late payments, foreign transactions, or returned payments.
Taking these fees into account when applying for a credit card helps to provide a fuller picture of what the loan may actually cost over its lifetime.
Keep in mind that APR is distinct from interest rate, which is simply the additional cost of borrowing money. Like APR, interest rate is typically expressed as a percentage of the principal. However, when looking at the average credit card interest rate vs. the average APR, youre not comparing apples to apples.
For example, if a consumer takes out a $1,000 loan with a 10% simple interest rate and a one-year term, they will pay $1,100 over the lifetime of the loan the principal $1,000 plus interest of $100.
While this example is extremely simplified, its helpful in demonstrating the difference between a simple interest rate and a not-so-simple APR calculation. If the consumer calculates the cost of the same $1,000 loan, considering the various fees that go into the APR, the number will likely be higher than the stated interest rate.
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Selecting A Rewards Credit Card
Generally speaking, cards that earn you points are usually best used for travel redemptions. These cards will likely give you other ways to cash out your points, but the majority of the time, you get the most value for your points when redeeming for travel. Similar to cash-back cards, you want to pick a card that gives you the most points on the categories you spend the most money. You also want to figure out what type of travel you prefer you could get an airline-branded credit card or a hotel-branded one. There are also credit cards that allow you to redeem for any type of travel. Regardless of what you go with, you need to know how the reward programs work so you can maximize your points.
Mbna True Line Gold Mastercard*
People looking to reduce the amount of interest they pay should consider a low-interest credit card like the MBNA True Line Gold card. You wont earn anything for your spending on the card, but the interest rate is just 8.99%, which is significantly lower than the average of 19.99% most other credit cards charge. If youre currently carrying a balance on a credit card with a higher interest rate, then you should also consider taking advantage of the optional balance transfer at the time of application. Balances transferred wont be charged interest for a full six months, which could save you bundles.
- Annual fee: $39
- Purchase interest rate: 8.99%
- Balance transfer offer: Optional balance transfer at 0% interest for the first 6 months
NOTE: this offer is not available for residents of Quebec
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How To Have A Good Apr On A Credit Card
As you can see, APR rates depend on a number of factors. Before you can get a good APR, you need to know whats a good APR for a credit card for your unique situation. APRs also arent set in stone and there are certain actions you can take to help secure the best possible APR for your credit card:
Fix Your Credit Score
Many credit card companies base your APR on your credit score and other financial risk factors. APRs determined this way can vary by as much as 10%, meaning it can have a significant impact on how much interest youll pay. Knowing how to fix your credit score is a crucial part of getting the best credit card deals.
Compare Different Offers
APR rates and the terms associated with them may vary drastically from card to card. Applying for various credit cards and then comparing your offers is the best way to land a good APR for your credit cards. Even if you cannot get a much lower APR rate, you might find a better introductory offer or more suitable billing periods.
Make a Payment Plan
To avoid higher penalty APRs, make sure you make payments on time. Some cards have autopay functions for this while credit builder cards allow you to ensure your credit card expenditure, making it nearly impossible to miss settling your balance.
Monitor Your Credit Report
Regularly reviewing your credit score can help you identify and address anything that may negatively impact it. You can get a credit report for free from all three major credit bureaus.
How To Qualify For A Good Credit Card Apr
It pays to know how you might qualify for a lower credit card APR for everyday purchases. Credit card issuers most often look to your FICO credit score to determine how likely you are to make full payments on what you spend.
“To qualify for a good APR, you’ll need a good credit score,” says John Li, co-founder and CTO of the financial lending company Fig Loans. “With good behavior, your credit score will start to push upward in about six months.”
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Rogers World Elite Mastercard
Frequent U.S. travellers and cross-border shoppers need a card that wont break the bank when it comes to the foreign transaction fees that most banks charge. It is usually 2.5% for purchases made in another currency. The Rogers World Elite gets this nod because it offers 3% cash back on U.S.-currency purchases, which works out to a 0.5% return when you factor in foreign transaction fees. Pair that with no annual fee, and 1.5% back on all other purchases, and you have a competitive card.
However, world travellers will want to keep in mind that only the regular 1.5% earn rate will apply on foreign currency purchases outside the U.S., so you wont come out ahead after being hit with the 2.5% foreign transaction fee.
This card does include travel medical insurance, which covers you for trips up to 10 days. However, it also comes with a $15,000-a-year minimum spend, and a steep annual income requirement. So youll want to consider another option if you dont make $80,000 a year as an individual, or $150,000 as a household.
- Annual fee: $0
- Welcome bonus: $25 when you make your first purchase within your first 3 months
- Earn rate: 3% on purchases in U.S. currency and 1.5% cash back on all other purchases
- Income requirement: $80,000 individual $150,000 household
- Additional benefits: Travel emergency medical insurance for 10 days rental car insurance trip interruption and cancellation coverage
Also Consider: Scotiabank Gold American Express*
The Scotiabank Gold American Express has been a longtime favourite for Canadians, especially those who travel. The first thing youll notice about this card is the Scotia Rewards earn rate is a very healthy 5 points per $1 on groceries, dining and entertainment. Gas gets 3 points per $1, as do spends in two other categories: Public transit and eligible streaming services. All other purchases earn you 1 point per $1 spent. This card also doesnt charge a foreign transaction feeits one of the very few Canadian cards to offer this perk. Consider it a 2.5% bonus on all foreign currency transactions, including online purchases.
- Annual fee: $120
- Welcome offer: You can earn up to 40,000 Scene and travel points by spending $1,000 in everyday purchases in the first 3 months. You can also earn an additional 20,000 points when you spend $7,500 in everyday purchases in your first year. Apply by January 1 2022.
- Earn rate: 5 points per $1 spent on groceries, dining and entertainment 3 points per $1 on gas, public transit and eligible streaming services and 1 point per $1 on all other purchases
- Income requirement: $12,000
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Fixed Vs Variable Aprs
If the math isnt confusing enough, some cards will have APRs that change every month. A fixed APR is going to stay the same, unless something major happens, like you ask for a reduced rate from the creditor, or a low introductory rate expires. A variable APR is often tied to the prime rate.
The Prime Rate, usually based on the federal funds rate set by the Federal Reserve, is currently 3.25%. So a credit card might have an interest rate of 10%+ prime, giving you a rate of 13.25%. If the prime rate goes up, so does your credit card rate.
For more about these rates and other kinds of interest, see our article and infographic What Does That Interest Rate Really Mean?
How Much Does Credit Card Interest Cost You
Its easy to ignore your credit cards APR until youre carrying a balance and see just how much interest can cost you on your statement, says . At that point, you may find yourself scrambling for options to reduce that cost.
It helps to have a general understanding of how much interest youll pay on a balance and how paying a higher interest rate can make the amount you owe escalate quickly.
Heres an example of how much interest you would pay on a credit card with a balance of $5,000, given three different purchase APRs and a minimum monthly payment.
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Target Your Debt By Apr
Even if your creditors agree to reduce your rates, you will still spend money each month on high interest charges as long as you have credit card debt. The only way to avoid interest charges on high APR credit cards is to start a billing and end billing cycles with a zero balance. If you pay off your charges in full every month, high APR wont be a problem.
If youre concerned about APR now, its probably because you carry balances over from month to month. In this case, you need to implement a debt reduction plan. You streamline your budget to maximize the money you have, then target debts for elimination by APR.
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How To Evaluate Credit Card Aprs
The APR on a credit card can come down to the type of card you choose. For example, cash back cards, student credit cards, travel rewards cards and retail store cards tend to carry higher interest rates.
But low-rate credit cards typically charge an APR more than three percentage points lower than the national average for all cards. According to , the national average rate for low-interest cards is below 13% as of January 2022. With an excellent credit score, you may be able to do even better.
A good credit card APR rate is always going to be 0% however, that isnt always realistic, says Michael Foguth, a retirement planner and founder of the Foguth Financial Group in Brighton, Michigan. Your goal is to keep it in the single digits if you do have to pay interest.
Here are a few things to consider when shopping for a credit card:
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