What is a good credit card APR?


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Interest rates on new card offers at an all-time high

Personal finance writer
Writes about banking, credit cards and mobile finance.

What is a good credit card APR?

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Credit card
interest rates in 2018 are on a slow-moving escalator, creeping ever upward.
Average card APRs are now at an all-time high, with no top floor in sight. 

Consumers with good credit shouldn’t have to settle for average. With a little knowledge and a little searching, you can do better.

Rates are high

CreditCards.com’s weekly Credit Card Rate Report for Feb. 21, 2018, pegged the
national average APR at an all-time high 16.41 percent. That average is more than a quarter percentage
point higher than just six months ago.

If you’re shopping for a new credit card –
and you tend to carry a balance – finding a low-interest rate card can be harder
than in the past, but they are still out there. Depending on the size of your balance, a lower  APR could save
you hundreds of dollars in interest payments per year.

So what’s a good rate? Would you know one
if you saw it?

“A good
credit card APR is one that a customer can afford in the long term and that is
within the limits of their paying capabilities,” says Veneta Sotiropoulos,
associate professor of marketing at New York Institute of Technology School of

Settling on a figure may depend on the type
of card you apply for. Rewards cards and retail store cards, for example, tend
to carry higher interest rates. The average rewards credit card charges an APR
roughly 10 basis points higher than the national average for all cards, while
the standard cash-back card interest rate is about 25 basis points higher than
average, the weekly rate report found. A basis point is one-hundredth of a
percentage point.

“A good credit card APR rate is always going to be 0 percent; however, that isn’t always realistic.”

Still, you may be able to find offers that
shave at least a few full percentage points off the average. Low-rate credit
cards typically charge an APR more than 3 percentage points lower than the
national average for all cards, and with an excellent credit score, you could do even better.

“A good
credit card APR rate is always going to be 0 percent; however, that isn’t
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.”

How to qualify

Not everyone is going to be able to find –
or qualify for – a credit card that charges less than 10 percent APR. If you
want a super-low interest rate card, you may have to turn to a credit union or smaller bank. The biggest issuers generally aren’t competitive on price.

PenFed Credit Union, the third largest credit
union in the U.S. by assets, offers a range of 8.99 to 17.99 percent APR on its
PenFed Gold Visa card. That bottom-end interest rate is among the lowest credit
card APRs on the market. And USAA, a credit union for military members and
their families, offers the USAA Rate Advantage Visa Platinum card with a 8.15
to 25.15 percent range.

Eric Bahl,
PenFed’s director of card product and channel development, says customers
expect credit unions to include cards with extremely low interest rates in
their portfolio.

“We know
that people trust us with low-rate loans and with low-rate credit cards,”
Bahl says. “And when people trust you they pull your card out more

You have to
become a credit union member to qualify for these cards. You’ll also need to
meet credit score and income requirements, but there’s no guarantee you’ll get
the lowest APR.

Not everyone is going to be able to find –
or qualify for – a credit card that charges less than 10 percent APR.

Generally, the
better your credit score, the more likely you are to get the lowest rate, but
some consumers with great credit scores have been unpleasantly surprised after
applying for a lower rate card, but end up with an APR in the higher range.

If you can’t qualify for a credit union that offers a
low-rate card or prefer dealing with a bank, you’re not likely to find a card
offering much lower than 12 percent APR. But even this better-than-average rate
can help you save money.

If you reduce your APR by just 3 percentage points off the
average, you’ll save yourself $150 in interest charges per year on a $5,000

PenFed, like
other issuers, doesn’t reveal a threshold at which you’ll qualify for the best
rates. You’ll find no minimum credit score requirement displayed on its website
or in the fine print.

“If you’re
in the mid-700s or higher, you should be able to get what you want,” says
Gerri Detweiler, education director for Nav, a San Mateo,
California-based company that helps entrepreneurs manage their business credit.
“The high-600s to mid-700s is second tier.”

What you should do before you apply

Avoid nasty
surprises when you apply for a new credit card. Here’s how:

  • Check your credit.
    Pull your TransUnion credit report and
    score for free at CreditCards.com. “If everything is shipshape, you’re
    more likely to qualify for the lower tiers,” Bahl says. “Generally,
    people who are aware of their credit are not caught off guard.”

  • Improve that score.
    If your score isn’t where you need it to
    be to qualify for the lowest interest rate, you have work to do. Start by making
    sure you always pay your bills on time. Payment history is the most important
    component of your
    credit score. You also may need to work to lower your credit utilization – that’s how much of the credit you
    have available that you use at a given time.

“Have your
ducks in a row. Have a good picture of your credit,” Bahl says. “It’s
ability to pay. Everything folds into that magical metric.”

No guarantees when applying

“In many
cases, you don’t know what you’re going to qualify for until you apply,”
Detweiler says. “The lowest rates obviously go to the people with the
highest credit scores. And that can be a Catch-22 because debt can lower your
credit score.”

way to protect yourself, at least temporarily, in case you don’t score the best
advertised rate is to find a low-rate card that also offers a 0 percent APR
introductory offer
. That will free you from any interest payments for a set
period of time, Detweiler says.

Discover it Cashback Match, for example,
charges no interest on purchases and balance transfers for 14 months (then
you’ll pay a variable APR of 13.24 to 24.24 percent). If you can qualify for
the low end, your interest rate will be more than 3 percentage points below
average. If not, you’ll still have more than a year when you won’t have to pay

Talk to your issuer

you’re looking for a lower interest rate, but you don’t want to open a new card, another
option is to call your current issuer and ask for a lower APR,
Detweiler says. According to a 2017 CreditCards.com poll, 69 percent of those who asked for a lower APR got one.

worst the card issuer can do is say no. It’s not the end of the world, either,
because credit card interest rates, while on the rise, still may be a cheaper
way to finance debt than other options.

still cheaper than a payday loan,” Detweiler says. “It’s still [inexpensive]
relatively speaking, and if you use it for a very short period of time you’re
not paying the full APR. It doesn’t have to break the bank if you need it for a
short term to tide you over.”

See related: Credit cards’ rate ranges make comparison shopping difficult, Rate hikes make paying only the minimum more costly


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