Whether you're looking to apply for a new credit card or checking the terms of your current card, you might be wondering about the average credit card interest rate and how yours might compare. After all, getting a good annual percentage rate (APR) may save you money in interest.
However, the answer to that question depends on the type of interest rate you’re looking at.
Let’s explore credit card interest rates, including what factors may influence them and how to score a lower APR on your credit card.
Different types of credit card interest rates
Credit card interest rates aren’t the same across the board. Different kinds of credit cards tend to have different interest rates. For example, you might find that airline credit cards have higher interest rates than flexible cash back rewards cards.
Your credit card interest rate also might not be a single number. Instead, it might depend on the type of transaction and how you use your card.
Here are some credit card interest rate terms that are important to understand:
- Purchase APR: This is the credit card interest rate for purchases made with that card
- Low intro APR on purchases: This is an interest rate you can get as a limited-time introductory offer with some credit cards. A card with a low intro APR on purchases offers a set period with a low interest rate on regular purchases.
- Low intro APR on balance transfers: Credit cards with a low intro APR on balance transfers offer a period of low interest when you transfer balances from other sources, such as credit cards. Balance transfer fees typically apply.
- Penalty APR: Penalty APR is a rate that is charged when a cardholder violates certain terms of the card, such as missing a minimum payment. A penalty APR is typically higher than a card's normal APR.
- Cash advance APR: If you use your credit card to get a cash advance, that transaction comes with a cash advance APR. It applies from the date you withdraw the money and may be higher than your card’s other interest rates.
While national trends and average credit card interest rates can be useful guidelines, remember that a cardholder’s APR will also depend on their creditworthiness and income. And, for the most part, credit cards come with variable APRs. That means they can change over time.
Factors that impact your credit card APR
Your credit card’s purchase APR may be influenced by several factors, such as:
- Changes to the prime rate: Credit card interest rates are typically tied to the prime rate, which may vary based on economic changes and Federal Reserve policy. Changes to the prime rate may impact your credit card APR.
- Your credit score: In general, the higher your credit score, the lower the credit card APR you may qualify for
- Payment history: Missed payments can not only impact your credit score, missing a credit card payment, you may have to pay a higher penalty APR
3 key ways to get a lower credit card interest rate
If you’re looking to get a credit card with a lower APR, these options may help you.
- Improve your credit score
Working on your creditworthiness can help you qualify for lower APRs on new credit cards.
If you have revolving credit card debt, paying down that debt can help. That would lower your credit utilization ratio, which is the percentage of your total available credit that you’re currently using. The ratio is an important factor in calculating your credit score.
Other ways to improve your creditworthiness can involve building a history of timely payments and disputing any errors in your credit report.
- Compare credit cards
Credit cards are offered at a variety of rates. Check to see what information is available about credit cards you’re thinking of applying for. You may also consider credit card pre-qualification, which may let you understand if you’re likely to qualify for a given credit card without harming your credit.
- Take advantage of low intro APR
Some credit cards come with low intro APR offers for purchases, balance transfers, or both. After that period ends, however, the APR would typically go up to the usual rate. It’s a good idea to be aware of when the introductory periods end and make sure you understand any relevant fees, such as balance transfer fees.
Credit card interest rates can change based on factors you may not have control over, like economic conditions. But there are still things you can do to help you access lower APRs and save money on interest.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
