Published in: Credit Cards | Nov. 26, 2018

What Is a Good APR for a Credit Card?

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Three credit cards on top of each other on a table.

Image source: Getty Images

Image source: Getty Images.

Americans spent a whopping $104 billion on credit card interest and fees over the past year, up 11% from the year before, according to a recent FDIC study.

On top of that, interest rates have been increasing for several years, and will continue to increase. Many consumers are paying higher interest rates than they should be without even realizing, as evidenced by the scandal earlier this year in which Citigroup overcharged 1.75 million credit card accounts on interest.

Are you getting the interest rate you deserve? Let’s discuss what your credit card interest rates should look like and how to get them lower.

What a credit card APR should be

The average APR on all credit cards as of writing this is 16.92%. However, that doesn’t make it a good APR.

If you tend to carry a balance, 16.92% is actually quite high. Consider the fact that the average interest rate on a personal loan for people who have good credit is 13.5% to 15.5%. If you have excellent credit, that number drops to 10.3% to 12.5%. A mortgage loan is even lower, at 4.71%, and auto loan interest rates can go as low as 0%.

Credit cards will always have higher interest rates, but that doesn’t mean you should be settling for 16.92%. Plenty of major banks offer credit cards with interest rates starting at 13% or 14%, and the average APR on credit cards from credit unions was 9.37% in 2017, according to data from Datatrac.

To give you a sense of just how much difference a few percentage points can make when it comes to paying off credit card debt, the table below shows you what it looks like to pay off $10,000 of credit card debt in $300 monthly installments with three different interest rates.

Metric 18% APR 14% APR 10% APR
Time to pay off debt 3.9 years 3.6 years 3.3 years
Total interest paid $3,967 $2,738 $1,764
Total amount paid $13,967 $12,738 $11,764

Data source: Author's calculations.

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.

There is no one answer to what a good interest rate for a credit card is -- it depends largely on your credit score and how you want to use the credit card. However, the national average for a low interest credit card is sitting at 13.99% at the time of this writing.

If you have good credit and foresee yourself carrying a balance, anything below 14% is a good APR. If you have excellent credit, you could qualify for an interest rate closer to 10%. If you have bad credit, you could easily see interest rates in the high 20s. The best secured credit cards for building credit have APRs starting at around 24%.

How to get a credit card with a low interest rate

If you’re currently paying off debt or plan to carry a balance, lowering your interest rate is one of the most effective ways to save money. Whether it’s working with your current issuer or opening a new credit card, you have a number of options.

Negotiate with your bank -- Almost everything is negotiable, including your interest rate. If you’ve demonstrated that you can pay your bills on time, and especially if your credit score has gone up since you originally joined, call your bank and ask if you qualify for a lower interest rate. Be sure to mention your good credit score and history of on-time payments.

Apply for a low interest credit card -- If calling your bank doesn’t work, it’s time to shop around. There are plenty of great low-interest credit cards out there that are good to have on hand if you ever have to carry a balance. Just make sure you qualify before you apply.

Get a 0% intro APR credit card -- If you already have credit card debt and are paying a high interest rate on it (think 14% or more), it’s time to consider a balance transfer credit card. These credit cards offer a 0% APR on balance transfers for a limited period of time, allowing you to pay off your debt interest-free. Keep in mind that most of these cards do charge a balance transfer fee, and not paying it off before the promotional period ends could leave you with a higher APR than you had before.

Join a credit union -- Sometimes credit unions offer interest rates even lower than those that come with low interest credit cards from major banks. That’s because credit unions are not-for-profit organizations that pass off their profits to members in the form of low fees and better interest rates on savings accounts and credit cards. You do have to qualify to be a member, but often, joining a credit union is as simple as paying a small annual fee or living in a certain area.

Don’t carry a balance -- The best solution to avoid paying high interest fees is to avoid carrying a balance at all. Paying off your credit card bill in full every month will ensure that you don’t waste a cent on interest fees.

Don't pay credit card interest until nearly 2022

The Ascent just released a free credit card guide that could help you pay off credit card debt once and for all. Inside, you'll uncover a simple debt-cutting strategy that could save you $1,863 in interest charges paying off $10,000 of debt. Best yet, you can get started in just three minutes!

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