Legal, Regulatory, and Privacy Issues

What is a good APR for a credit card?


With new card offers’ interest rates at an all-time high, you may still be able to find offers that shave a few percentage points.

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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’s weekly survey of credit card offers for May 2, 2018, pegged the national average APR at an all-time high 16.71 percent. That average is more than a half percentage point higher than just six months ago. (For the current national average APR, see the Weekly Rate Report.)

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 Management.

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 compete on services, and aren’t as competitive on price.

Eric Bahl, director of card product and channel development for PenFed Credit Union, 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 often.”

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 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 balance.

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 “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 available credit you have 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.”

One 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.

Talk to your issuer

If 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 poll, 69 percent of those who asked for a lower APR got one.

The 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.

“It’s 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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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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