Money

What’s is a Good Annual Percentage Rate For Credit Cards?

With the current resident in the White House, consumer prices are rising so rapidly there are reliable concerns about consistent inflation.

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Experian’s data shows that the average FICO credit score in America has grown by around one point every year for the past 10 years. During President Donald J. Trump’s Administration–especially 2019 to 2020–the nation’s average credit score jumped seven points from 703 to 710.

Now is a good time to look at your money situation and prepare for the likely cost increases.

If you are considering opening a credit card account, one of the key terms to know is the annual percentage rate, or APR. The APR represents the credit card’s interest rate—the price you pay to borrow money from a lender.

There’s no industry standard for what’s considered to be a good APR for a credit card. However, the Federal Reserve regularly determines the national average. And for June 2, 2021, the average credit card interest rate was 16.31%.

How Credit Card APRs Are Determined

Every credit card issuer sets its own credit card APRs. And issuers usually determine credit card APRs based on two main factors:

  • The prime rate. Most lenders set their own interest rates based on the prime rate. The prime rate is an index that’s closely tied to the federal funds rate—the rate banks charge each other for borrowing money. When lenders set their own credit card APRs, they typically add a certain margin to the prime rate. So if the prime rate is 3% and the bank’s margin is 12%, for example, the APR will be 15%.
  • The cardholder’s financial situation. Generally, the better your credit, the lower your interest rates might be. As the Consumer Financial Protection Bureau (CFPB) explains, “The credit card company may decide which interest rate to charge you based on your application and your credit history.”

Types of Credit Card APRs


Credit cards typically have more than one type of APR. Which APR you’re charged depends on how you use the card. And understanding when these different APRs apply can help you pay less in interest.

Here are five types of APRs you might find with a credit card:

  • Purchase APR: When you charge purchases to your credit card and carry the balance to the next billing cycle, your credit card issuer applies a purchase APR to the unpaid portion of your balance. 
  • Balance transfer APR: The balance transfer APR applies to any debt you transfer to your credit card account. The balance transfer APR is usually charged from the date you make a transfer. And keep in mind that balance transfers may come with fees, too.
  • Cash advance APR: Some credit card issuers allow you to withdraw cash from your credit card’s line of credit—called a cash advance. A credit card’s cash advance APR may be higher than the card’s purchase or balance transfer APRs. And interest generally begins to accrue immediately on cash advances. They may come with fees too. 
  • Penalty APR: Late credit card payments could lead to a penalty APR. That’s because your issuer may increase your APR if you’re more than 60 days late on your credit card payments. But the increase might not be permanent. You can get back your original purchase APR if you make on-time payments in each of the six consecutive months after receiving the penalty APR.
  • Introductory APR: Some credit cards offer an introductory APR—a lower-than-usual APR that you get for a set period of time when you open an account. Introductory APR periods must last at least six months and can apply to a card’s purchase APR, balance transfer APR or both. But keep in mind that an introductory APR is a limited-time offer. When the introductory period is over, the standard APR will apply. And if you’re carrying a balance on the card when the introductory APR period ends, you’ll start to see the card’s standard rate applied to the balance.

How to Qualify for a Good APR

Remember: The better your credit, the lower your interest rates might be. And responsible financial behavior can help you get and keep good credit—and qualify for good APRs.

Here are a few tips from

that could help:

  • Pay your bills on time. Your payment history is a major factor when it comes to your credit scores. Making on-time payments is a great way to show lenders that you’re a responsible borrower. You could even consider setting reminders or using automatic payments to help you stay on top of your bills.
  • Stay well below your credit limits. According to the CFPB, “Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.” That’s because your credit utilization ratio—a measure of how much of your available credit you’re using—can affect your credit. And the lower your credit utilization ratio, the better it could be for your credit scores.
  • Apply only for the credit you need. If you apply for multiple credit cards and loans over a short period of time, lenders may incorrectly think your financial situation has changed for the worse. And that could hurt your credit.

Monitor Your Credit

Another tip to help you build or maintain your credit—and qualify for good credit card APRs? Regularly monitor your credit to keep track of your progress. 

I use CreditWise from Capital One, a free tool that allows me to access my TransUnion® credit report and VantageScore® 3.0 credit score—without hurting my score. It’s free for everyone, not just Capital One customers. 

Checking your credit reports can also help you stay on top of your credit. Just visit AnnualCreditReport.com to learn how you can get free copies of your credit reports from each of the three major credit bureaus.

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Use this code: https://capital.one/2Tmt9L0 to apply for a Secured Mastercard® by Capital One. *

* Jack Dennis receives a referral bonus for each person who acquires a credit card from this offer.

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