Credit Card Interest Rates Guide

To find the interest rate on your credit card, look at your cardmember agreement and your monthly credit card statements. Your interest rate will be there in the form of an annual percentage rate (APR). But as “annual” implies, an APR is the cumulative interest rate for a whole year, which isn't all that helpful for calculating actual interest charges from day to day or month to month.

You can figure your daily interest rate – or daily periodic rate – by dividing your APR by 365 (days in a year) because credit card interest compounds daily. (It's worth noting that some card issuers may divide by 360 rather than 365). This calculation will give you the actual daily rate at which you accrue interest on a card. If your APR is 19.99%, your daily periodic rate would be 0.0547%.

The terms APR and interest rate are often used interchangeably. For general purposes, they express the same idea, though you'll get a much better sense of your actual “interest rate” by using the daily periodic rate.

It's worth noting that most credit card rates change (indicated in terms by a V next to your APR). So if the so-called prime rate that credit card APRs are tied to goes up, your rate will rise, too. A credit card agreement may note that the account's APR is the prime rate plus a certain fixed percentage. Or, your rate might rise to a penalty APR (also found in credit card terms) if you miss a payment. Your card issuer must notify you of a rate change 45 days before it takes effect, unless you're 60 days or more past-due on payment.

Though it's good practice to keep an eye on your APR, interest rates don't matter if you pay your credit card bill in full every month. If you aim to pay no interest, you won't have to worry about crunching these numbers.

No, you don't have to pay APR if you pay on time and in full every month. Also, 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 in full every single billing cycle. If you don't do that one month, you'll lose your grace period. As a result, your charges will start accruing interest right away. You'll have to pay in full for two consecutive billing cycles to get it back.

Note that paying just the minimum amount required 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 at all.

How to Avoid Paying APR on Your Credit Card

• Pay on time and in full: 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.
• Don't lose your grace period: 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.
• Don't make any balance transfers or cash advances: These transactions don't have grace periods, so interest will begin piling up right away. The exception is if your balance transfer has a 0% introductory rate for a certain number of months.
• Get a 0% Intro APR credit card: Getting a card like this will give 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. 

However, it's 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. Also, 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.

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 you have enough funds in your bank account to cover the bill.

Credit card companies determine their APRs based on creditworthiness, or how much risk you pose as a borrower, as well as broader factors like the health of the economy. Creditworthiness is based on criteria such as an applicant's credit history, income and total debt owed. Other considerations include age, monthly housing payments and employment status. So if a credit card company advertises a card's APR as a range – 15% to 25%, for example – those are the main things that will determine the exact APR each approved applicant receives. There are also a number of factors that affect how issuers set their ranges, including the rates at which banks lend to their most creditworthy customers, the Federal Reserve's target rate and more.

How credit card companies determine their APRs:

• Creditworthiness is the main factor. Cards offered to people with good or excellent credit usually have lower APRs than cards available to people with less-established credit.
• Most credit card APRs are advertised as a range. When you get approved for a credit card, the issuer will determine what APR to assign based on your credit history, income, debt and more.
• Most credit card companies determine their APRs by adding a designated number of percentage points to the prime rate, as published by The Wall Street Journal.
• Credit card APRs are indirectly determined by the strength of the economy. During downturns, 0% credit card offers tend to disappear. And the average credit card APR is closely tied to the Federal Reserve's target rate.
• Credit card APRs usually are variable but can be fixed in some cases. A fixed APR does not fluctuate with changes to an index such as the prime rate. A variable APR changes as the prime rate or other index changes.
• If you don't carry a balance from month to month, you won't pay any interest. But if you don't pay in full by your due date (or by the due date following your 0% introductory period), you will owe interest on the remaining balance after that day. You will also owe interest right away on cash advances. On balance transfers, interest accrues right away or after any 0% introductory APR ends.
• Credit card interest compounds daily. Each day that you have a balance, more interest is added. And you pay interest on both the original balance and all previous interest.

You can see your interest rate on your credit card statement, listed under APR. But your statement will include several APRs other than the rate for standard purchases. Expect to see annualized rates for balance transfers and for cash advances. There may also be a penalty APR, a rate you're charged if don't make at least the minimum payment by the due date. Credit card issuers can change your APR for pretty much any reason once your account has been open for at least 12 months. But if they do, they're required to let you know 45 days in advance and the rate increase can only apply to purchases made 14 days after the notice was sent.

If you're wondering how much interest you'll pay each month, you'll need to know the Daily Periodic Rate (DPR). Divide the APR by 365, the number of days in a year. Multiply that figure by the number of days in the billing cycle. You can also use WalletHub's credit card interest calculator.

A good interest rate on a credit card is anything below 14%. That is roughly the average regular interest rate on credit cards for people with excellent credit. Even a relatively good interest rate on credit cards for people with lower scores is not all that low. For example, credit card users with good or fair credit could pay interest at an annual rate of 20%+ and still have a below-average APR. Better-than-average for a credit card overall isn't much below 20%, either. That's why the best interest rate on a credit card is 0%.

How to Get a Good Interest Rate on a Credit Card

There are three ways to get the best possible credit card interest rate.

For starters, lots of credit cards offer 0% APR periods as introductory perks for new customers. They can be a great help to people looking to finance a large purchase or transfer a debt to pay it off faster. But those intro periods are always temporary. Most (but not all) 0% APR credit cards require good credit or better, too.

The second way to avoid credit card interest altogether is to pay your full statement balance by the due date every billing period. Setting up automatic monthly bill payments from a bank account can be a big help with that. You can also try the “Island Approach”, which is a method of using multiple credit cards for different expenses. For example, you could use your lowest-rate card—maybe even a card with a 0% APR period—for things you'll need to pay off over a period of time, and a rewards card for everyday purchases that you pay off every month. That way, you wouldn't pay interest at all, no matter what rate you have on the rewards card.

Ultimately, there is also a number of things you can do to raise your credit score and, in turn, get a better shot at a good interest rate on your next credit card. Because if a low credit card APR is your objective, it truly pays to have an “excellent” credit score of 750 or higher

You can figure out how much interest you will pay on your credit card by dividing the card's APR by 365. Then, multiply the result by your average daily balance and, subsequently, the number of days in the billing period. The interest charges you owe will also be listed on the credit card's monthly statement. Still, the easiest way to determine how much interest you will pay on a credit card is to use WalletHub's credit card payoff calculator. It's a free tool that allows you to input the amount of debt you have (or will have) and your interest rate to get a payoff plan and a cost estimate.

You can set a payoff date, and we'll tell you what monthly payments you'll need to make. Or you can set a fixed monthly payment, and we'll tell you how long it will take to pay off. We'll also tell you the total amount of interest you can expect to pay and even which credit cards can save you the most money.

Even if you use a credit card calculator, however, it's still a good idea to know how to crunch the numbers yourself.

How to Calculate Credit Card Interest Charges

1. Find your credit card's APR

Your credit card's APR will be listed in your cardmember agreement and on your monthly credit card statements.

2. Divide your APR by 365

An APR reflects the annual cost of borrowing, but credit card charges are assessed daily. Dividing by the number of days in a year gives you the daily interest rate – or daily periodic rate – for your credit card.

3. Multiply the daily interest rate by your average daily balance

Your average daily balance is the sum of your balances for each day in the billing period divided by the number of days in the billing period.

4. Multiply the resulting amount by the number of days in the billing period

When this calculation is done, you will have the interest charges due for the billing period. Just bear in mind that some details do vary by credit card company.

Whether you use WalletHub's calculator or calculate credit card interest charges by hand, you should first understand the basics of how credit card interest works. We'll highlight some key points below.

Key Things to Know About How Much Interest You'll Pay on Your Credit Card

• If you pay off your balance in full by your due date, you won't owe any interest.
• If you carry a balance from month to month, the interest you'll owe depends on your Annual Percentage Rate (APR). That shows how much interest you'd pay in a year. But since credit card interest gets charged daily, your card's interest rate is its APR divided by 365.
• Credit card interest compounds daily, which means the interest rate applies to your whole balance at the end of each day, including unpaid interest charges from previous days.
• The average APR among new credit card offers is 22.15%. But credit card APRs vary widely based on the applicant's credit standing.
• Nearly all credit card APRs are variable, as opposed to fixed, meaning they're based on a particular benchmark interest rate. This usually is the prime rate, which banks use when lending to each other.
• Many cards offer lower introductory APRs on purchases and balance transfers for a limited time, often starting at 0%. Once the introductory period ends, the APR will change to the normal rate.

There's no way to tell you how much interest you'll owe without knowing your card's balance and APR as well as the monthly payment you can afford. But if you plug that info into WalletHub's calculator, you'll have your answer in no time.

To get a low interest credit card, start by checking your credit score and figuring out how long you expect to need a low interest rate for, in addition to why you need it. Low interest credit cards usually require good credit or better, and low rates are available for new purchases as well as balance transfers.

How to Get a Low Interest Credit Card

• Check your credit score
• Decide what you need to do with your low interest credit card
• Apply for the card that best suits your credit score and your needs

Check your credit score

To get a 0% APR credit card, whether for purchases or balance transfers, you'll generally need good credit or better. And as a rule of thumb, the best credit scores get the lowest regular APRs.

Decide what you need to do with your low interest credit card

If you're looking to finance a large future purchase, you'll do best with a card offering 0% on purchases. A 0% APR balance transfer card will work better if you have existing debt. And a card with a low regular interest rate is best for people who don't know when they'll need to carry a balance but want a safety net that won't break the bank in interest charges.

Apply for the card that best suits your credit score and your needs

Make sure you research (and meet) the card's approval requirements before you apply.

Other Things to Consider When Shopping for a Low Interest Credit Card

You likely won't know your regular interest rate until you're approved

Most credit cards advertise their regular APRs as a range: 15% - 25% (V), for example. That means your assigned rate could be as low as 15%, as high as 25%, or somewhere in between. And the “(V)” indicates the rate could change over time as economic conditions evolve.

The exact interest rate you're given (from within the advertised range) will depend on your credit history, income, and debt – your overall creditworthiness. Unless you apply for a card that has a set regular APR, rather than one advertised as a range, you won't know exactly what regular APR you'll get until your application is accepted. As a result, it's best to consider both the high and low ends of the range when comparing credit card rates, even if you have good credit.

Using a 0% APR period to pay off debt is usually not free

If you have existing debt and need a break on interest to pay it down faster, the best option is usually a 0% balance transfer credit card. But most 0% APR balance transfer credit cards charge a balance transfer fee, which is a percentage of the amount you transfer. In this case, a balance transfer isn't totally free. Cards with no balance transfer fee and 0% APR periods do exist, but they're not common.

A 0% APR period will likely become a high regular rate

A no-annual-fee credit card with a 0% APR intro period on purchases is a great way to finance a big purchase for free. The intro period will allow you to pay off a hefty purchase without paying an extra dime, as long as you pay it off before the intro period ends. After that, the card's regular interest rate will apply to any remaining balance, and regular rates tend to be pretty high on 0% intro APR cards.

Having a low interest credit card as a safety net isn't a bad idea

If you want a low interest credit card just in case of emergency, look for a card with a low regular APR range or a single low rate listed.

Your existing APR may be open to negotiation

If you already have a high-APR credit card, and you don't particularly need a 0% APR period, a better option might be to try calling your credit card company's customer service line to ask for a lower regular rate. If you make a good case, citing your good and/or long history with your card and the company, you may get offered a lower interest rate. You will have better luck if your credit situation has improved since you applied for the card, too.

A good APR for a first credit card is anything below 20%. Most first-timers have no credit history, so they need to prove themselves as responsible borrowers before getting a really low APR. But there are some exceptions. Student cards also give lower rates, but you have to be a student to get one. Another way to get a good APR for a first credit card is to apply for a secured card.

It's worth pointing out that carrying a balance on a secured card doesn't make much sense anyways. You can't buy anything that you wouldn't be able to afford without the secured card. That's because your spending limit is equal to the amount of your deposit. 

Some of the Best First-Time Credit Cards with Good APRs

Regular APR: 11.74% (V)

Ongoing Rewards: 1.5 points for exchange and commissary purchases and 1 point for every dollar spent on all other purchases

Annual Fee: $0

Minimum Credit Required: Limited History

Regular APR: 31.74% (V)

Ongoing Rewards: 5% discount on all purchases

Annual Fee: $0

Minimum Credit Required: Fair credit

Regular APR: 9.99%

Annual Fee: $48

Minimum Credit Required: Bad credit

Regular APR: 10%

Annual Fee: $0

Minimum Credit Required: Bad

Intro APR: 0% for 21 billing cycles on both new purchases and balance transfers made in the first 60 days of account opening. Balance transfers are subject to a fee of 3%.

Regular APR: 15.74% - 25.74% Variable

Annual Fee: $0

Minimum Credit Required: Excellent

If you're in the market for your first credit card, you probably don't have much credit history, unless you've been able to build some as an authorized user on someone else's card. This means you may not get a low APR, as these cards are usually reserved for people with at least good credit. 

As a result, your aim should be to find a card with no annual fee that you can get approved for. Then, pay in full every month by the due date to avoid interest. Paying your bill on time will also help you build credit and get to a card with a lower APR.

A 0% APR credit card won't hurt your credit score more than other types of credit cards would. Opening a new credit card – whether it's a 0% APR card or a rewards card, for example – will cause a small credit-score drop, due to the hard inquiry required by most credit card companies when evaluating an application. A 0% APR card won't hurt your credit simply by existing on your credit report, though, assuming the card is used responsibly.

If you use a 0% credit card to spend more than you can afford to repay before the card's regular interest rate takes effect, you may be charged a lot of money in interest. Even if you then transfer a high-interest balance to a 0% APR credit card, you will likely have to pay a balance transfer fee. You can learn more about the potential downsides of 0% APR credit cards below.

How a 0% APR Credit Card Could Hurt Your Credit

• Overspending. A 0% introductory period makes it easier to rack up a bigger bill than you'd planned on or can manage. No interest means there's less pressure to pay off your balance in full every month, too.
• Missed payments. If your 0% APR period turns into a high regular APR when you're carrying a large balance, it could quickly become unaffordable. And if you're unable to make the minimum payments, your credit score will definitely take a hit.
• High credit utilization. Many people get a 0% APR credit card to pay off a large purchase over time without paying interest. That's a good use of a 0% APR period. But if the purchase takes up most or all of the card's credit limit, the cardholder's credit utilization will go up. High credit utilization could damage your credit score.

It is worth noting that if you won't need your credit score for anything important for a while, temporarily high credit utilization is better than paying a lot in interest. Also, don't worry about negative remarks on your credit report just because you aren't paying interest—there's no truth to that claim.

Ultimately, if you're considering getting a new credit card for its 0% APR period, the best things you can do to minimize the chances of hurting your credit are to always make payments on time and avoid maxing out your credit limit. Also, it's not a bad idea to set spending boundaries beforehand to avoid paying the regular interest rate after the promotional period expires.

The highest credit card interest rate in recent memory was 79.9% on a card offered by First Premier Bank in 2010. That offer's not available anymore. The current highest credit card interest rate is 36%. That's on the First PREMIER® Bank Credit Card. The next highest credit card interest rate seems to be 35.99%, charged by the Total Visa® Card and the First Access Visa® Card. These rates are very high when you consider that the average interest rate is only around 18%.

Legally, there actually is no highest credit card interest rate that's possible. Credit card companies are allowed to charge any interest rate. But they must clearly state what that rate is in the card's terms and conditions. And companies that would like to charge outrageous interest rates are limited by what people are actually willing to pay. You should always make sure you know a card's interest rate before applying. Otherwise, it may come as a nasty surprise.

Here are some of the highest credit card interest rates:

• Highest historical credit card interest rate:9% APR on the old First Premier Bank Credit Card. This card is no longer available. It was for people with bad credit.
• First PREMIER® Bank Gold Credit Card: 36% APR. The card is unsecured and for bad credit. It has an annual fee of $50 - $125 1st yr, $45 - $49 after that. Plus, there's a $55 - $95 one-time processing fee.
• Total Visa® Card: 35.99% APR. The card is for bad credit. It has an annual fee of $75 1st yr, $48 after It has a $89 one-time processing fee.
• First Access Visa® Card: 34.99% APR. This card is for bad credit. It has an annual fee of $75 1st yr, $48 after that. It has an $95 one-time processing fee.

As you can see, the highest credit card interest rates are found on cards for people with bad credit. The better your credit is, the better your chance of getting a lower interest rate. But don't forget that no matter how high or low your interest rate is, it will never affect you unless you carry a balance between months. If you always pay off your bill in full, you'll never pay any interest unless you take out a cash advance. So, if you don't spend beyond your means, interest rates shouldn't be a huge consideration when you're picking a credit card.

But if you're not confident about your ability to pay in full, you should prioritize low interest rates in your search. Many cards will even offer you 0% interest for a number of months to start. But you'll usually need at least good credit to get a 0% intro APR.

Zero-interest credit cards charge a 0% interest rate on purchases and/or balance transfers for the duration of the introductory period – typically from 6 to 21 months, depending on the card. When the intro APR period ends, the regular interest rate kicks in for any remaining balance and any future purchases or balance transfers charged to the card. The average 0% APR period lasts for about 11 months.

Due to the fact that 0% APR credit cards provide a potentially long window for interest-free repayment, they're especially useful in financing big purchases or paying off large debts. The card's best use, however, will depend on the terms of the introductory APR period. Some 0% interest credit cards only offer zero interest on purchases, while others only offer it for balance transfers. Some offer the intro period for both purchases and balance transfers.

When you're shopping for a 0% APR credit card, it's a good idea to know what you want to use the intro period for, so you can get the card that benefits you most. Keep in mind that credit cards with 0% interest periods usually do not give way to a low regular APR. The average regular interest rate for a 0% APR credit card is about 19%, so it's best to have a plan to pay off any balance on the card before the intro period ends. A credit card payoff calculator can help.