What’s a good credit card APR?

Worried woman holding credit card and calculating bills while sitting on the couch at home — A helpful benchmark to look at is the current average credit card APR, which is data the Federal Reserve provides

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Your credit card’s APR, or annual percentage rate, is an important figure to pay attention to, especially if you do not pay off your card’s balance in full each and every statement cycle. The APR represents the interest rate you are charged on a credit card balance that remains after the card’s due date, and it can make a sizable difference in how much you ultimately have to pay to zero out your balance.

While credit card APRs have always been notoriously high, especially in comparison to other forms of borrowing, they have gotten even steeper in recent years. The “average interest rate on a commercial credit card is nearly 21% these days, according to Federal Reserve data,” which is “nearly double the rate seen 10 years ago,” said CBS News. So how can you know whether the rate you are quoted is better — or worse — than what is typical?

What is a good APR for a credit card?

Technically speaking, the “best APR you can get on a credit card is 0%,” said NerdWallet. That is a deal that will not last forever, though, as credit cards that do offer a 0% APR only do so for a brief promotional period, after which the card’s “interest rate resets to the ongoing APR,” said the outlet.

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Otherwise, a helpful benchmark to look at is the current average credit card APR, which is data the Federal Reserve provides. If your card is below that average, then it is likely a good rate. That said, “even a credit card at the national average can be considered a decent option, especially if you’re looking at one of today’s best credit cards that comes with rewards, bonuses and perks that can help offset any fees,” said Bankrate.

How are credit card APRs determined?

A major determinant of credit card APRs is the prime rate, which tracks the Federal Reserve’s target federal funds rate range. Based on that, “credit card issuers set their APRs by adding their profit margin (usually about 12% to 13%) to the prime rate,” said Bankrate.

Different types of cards also have different APRs. For instance, “if you’re looking for a high-value rewards credit card with premium benefits, you can count on a high APR,” whereas “some cards designed for beginner cardholders or those looking to improve their credit may have slightly lower interest rates,” said Yahoo Finance.

Your credit score heavily influences the APR you get, too. As you may expect, a higher credit score can generally land you a more favorable APR.

How can you qualify for a better APR?

While you may “not be able to control all factors that determine your APR, you can be proactive in maintaining or polishing your creditworthiness,” said NerdWallet. In turn, this may lead to a lower credit card APR. To improve your score, do the following:

Consistently pay your bills on time.
Keep your credit utilization rate (the amount of your total available credit you are currently using) as low as possible.
Avoid applying for multiple new borrowing opportunities at once, as this will result in multiple hard inquiries, which temporarily lower your score.
Monitor your credit report to look for any errors or issues affecting your score.

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.