What is a Good APR for a Credit Card? – Everything You Must Know What is a good APR for a credit card? You may ponder this question if you are on the hunt for a credit card. There are many things to look for while choosing a card, but the most important thing to note is its annual interest rate.
Different cards have different APR ranges, and it depends on the applicant’s creditworthiness. Does this sound complex? No worries, we have explained what is a high APR for credit cards, what is a good APR on a credit card and other points to keep in mind in this blog.
What is APR for Credit Cards? APR is the charge you pay for borrowing money from a credit card. The interest charges on the credit cards are determined via APR. If you carry the due balance, you have to pay the amount plus the accrued yearly interest rate.
The APR varies for different cards. You will find many cards, such as JCPenny credit cards with high APR above 30%, whereas on the other hand, there are cards like Tomo credit cards that charge zero to low APR.
Well, almost every credit card has an APR, but that does not mean you need to pay it. Many of them also provide grace periods, so if you pay your balance in full within the specified time frame, you will not owe any money to the bank.
How is Credit Card APR Determined? We already stated that you will see different APRs for different cards, so you need to choose the one that fits your lifestyle. For that, you can use our credit card calculator to check monthly payments based on the APR.
Here’s the thing, we often talk about how you must select a card with a low APR, but not much about how your creditworthiness is the deciding factor.
People with poor or fair CIBIL scores (below 669) tend to qualify for cards offering higher APR. On the other hand, people with FICO scores above 670 can generally qualify for all kinds of cards charging low APR.
Simply put, the company or bank determines the APR based on the applicant’s creditworthiness. So if you plan to get a business credit card or other valuable cards, you must work to boost your FICO score.
What is a High APR for a Credit Card and What to Expect? A high APR exceeds the national average of around 22% for interest-bearing credit cards. The APR on the majority of reward cards is higher than the national average. However, you can completely avoid interest charges by paying the balance in full each billing statement period.
Cards with high APR do not ask for a hard credit check, history, or score. As such, their advantages over low APR cards are minimal. Plus, cardholders do not get many flexible rewards, discounts, and offers with them. But that doesn’t mean you should stay away, as there are many high APR credit cards in the market that provide generous rewards and also build credit scores.
What is a Good Credit Card APR? According to the Federal Reserve , the average APR charged for interest-bearing credit card accounts in May 2023 was 22.16%. The average for all accounts was 20.68 percent. If your APR is lower than the average, you can probably consider it good.
However, not all credit cards are equal, and some will charge you more to carry a balance than others. For example, a rewards credit card with benefits and perks like Capital One Savor One is likely to have a higher APR range that exceeds that of basic cards.
How to Look for a Good APR for a Credit Card? When looking for a credit card with a good APR, one that comes with long intro APR periods is a good place to start.
As the APR you receive is determined by your credit score, the higher your credit score, the lower your APR. Any number less than 22% (current credit card average) can be considered as a good APR. People with bad credit may only be able to get cards with a higher rate of around 30%. Some people with a good history can also find cards with APRs as low as 16%.
How to Compare Credit Cards APR? Credit cards typically have varying APRs for different purposes, and some offer promotional financing to new cardholders. So you must shop around and compare rates based on how you intend to use your new card.
The first thing is to understand the features and benefits of the card and the types of APR charged by the credit company.
Second, you must know that instead of offering a single rate to everyone who qualifies, most credit cards offer a range of interest rates for purchases and balance transfers. This is due to risk-based pricing, in which lenders charge different rates to qualified borrowers based on their credit history and financial profile.
The specific type of credit cards, such as travel rewards cards like Citi Custom cash cards and its competitors, will have APRs in similar ranges. For instance, one issuer may offer a variable APR ranging from 17.99% to 27.99%, whereas another may offer 18.24% to 26.24 percent.
To compare these two, take the middle rate in the range , which is 22.99% for the first card and 22.24% for the second. If everything else is equal, you could save some money by selecting the second card. However, if the first card provides significantly better benefits, it may be a better fit overall.
How to Qualify for a Good APR for Credit Cards? If you want to qualify for a good APR on credit cards, the best thing is that you can work on your financial habits to achieve the goal. These are some tips to improve your credit score :
Keep a constant check on your FICO score. Set up automatic or recurring payments so that you don’t miss any billing dates. Always try to keep your credit utilization ratio low. Do not apply for several cards together. You can search for promotional offers and choose the card that gives multiple benefits. Do your market research and apply for the cards that do not have any APR. Once you start taking care of your financial habits earnestly, it will build a good track record, which as a result will help you secure the best APR credit cards.
We hope now you know what APR is and what is a good APR for a credit card. If you like the information, please share it with your friends to make them financially aware of this topic.
Read Next: What does a negative balance on a credit card mean and how to fit it?
Frequently Asked Questions Ans: An interest rate below 18-16% is considered good.
Ans: Having a high interest rate is fine if you pay your bills every month in full, otherwise, it can accrue many charges.
Ans: It is an annual interest rate that is applied monthly. If the APR is 20%, a 1.66% interest rate will be imposed on each month’s bill.
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