Is 12% a good credit card APR?

A 15% APR is good for credit cards and personal loans, as it’s cheaper than average. On the other hand, a 15% APR is not good for mortgages, student loans, or auto loans, as it’s far higher than what most borrowers should expect to pay.

15% Is a Good APR For:... read full answer

Credit cards

A 15% APR is good for a credit card. The average APR on a credit card is 20.16%.

Personal loans

A 15% APR is good for a personal loan. It’s not the lowest rate you can get, though. Personal loan APRs tend to range from around 4% to 36%.

15% Is NOT a Good APR For:

Mortgages

A 15% APR is very expensive for a mortgage. The average 30-year fixed mortgage rate is around 3%.

Student loans

A 15% APR is not good for student loans. The rates on federal student loans tend to be around 3% to 5%. Private student loans’ rates range from 1% to 12%.

Auto loans

A 15% APR is not good for auto loans. APRs on auto loans tend to range from around 4% to 10%, depending on whether you buy new or used.

A 21.99% APR on a credit card is higher than the average interest rate for new credit card offers. A 21.99% APR means that the credit card’s balance will increase by approximately 21.99% over the course of a year if the cardholder carries a balance the whole time. For example, if the APR is 21.99% and you carry a $1,000 balance for a year, you would owe around $216.89 in interest by the end of that year.... read full answer

Fortunately, you won’t be charged the 21.99% APR if you pay off the full balance by the due date every month. If you carry a balance from month to month, however, you’ll end up paying a good bit in interest. That’s because each day the balance goes unpaid, interest charges are compounded. In other words, interest is added to both your principal balance and any previous days’ accumulated interest.

Given that some months have more days than others, the credit card issuer will break down the APR using a daily periodic rate (DPR) to determine how much interest you’ll pay for a given billing period. To get the DPR for a credit card with a 21.99% APR, simply divide 21.99% by 365. The result is a rate of 0.0602% per day. Daily interest charges apply until the outstanding balance is paid in full.

No, you don’t have to pay APR if you pay on time and in full every month. And your card most likely has a grace period. A grace period is the length of time after the end of your billing cycle where you can pay off your balance and avoid interest. To take advantage of a grace period, you need to pay for all your charges every single billing cycle. If you don’t do that one month, you’ll lose your grace period, and your charges will start accruing interest right away. You’ll have to pay in full for two consecutive billing cycles to get it back.... read full answer

So paying on time won’t get you out of paying interest on its own. You’ll just avoid paying late fees and hurting your credit score. You have to pay in full if you don’t want to pay interest.

Here’s how to avoid paying APR:

• If you pay your bill in full by the due date every month, you won’t pay any interest, thanks to the grace period most credit cards have.
• A credit card’s grace period typically is the time between the end of the billing cycle and the due date.
• If you lose your grace period by carrying a balance past your due date, you can get it back by paying your bill in full two months in a row.
• Balance transfers and cash advances don’t have grace periods, so interest will begin piling up as soon as you make the transactions. The exception is if your balance transfer has a 0% introductory rate for a certain number of months.
• Getting a 0% Intro APR credit card gives you a larger window of opportunity to pay off your credit card. It allows you to pay off your balance before the end of the promotional APR period without accruing interest. You’ll still need to pay at least the minimum payment on time and any remaining balance that hasn’t been paid off by the end of the introductory 0% APR period will accrue interest at the card’s regular rate. It’s also a good idea to pay more than your minimum payment every month, as leaving a big balance on a credit card for a long time can cause a dip in your credit score.

The simplest way to handle things is to set up automatic monthly payments for your full statement balance from a bank account. Just make sure that account’s balance doesn’t get too low.