What Are Credit Card Interest Rates?
Credit card interest rates tell you how much it will cost to borrow money from a credit card company, by carrying a balance from month to month. For example, if your interest rate is 20% and you carry a $500 balance, you would owe roughly $100 in interest after a year.
What Is APR on a Credit Card?
The APR on a credit card represents the annual cost of carrying a balance with that credit card. The APR, or annual percentage rate, takes into account both a card’s daily interest rate and daily compounding, which is when interest applies to both the principal balance and previously assessed interest.
Learn more about what an APR is.
What Is a Good APR for a Credit Card?
A good APR for a credit card is below 13%, as that is roughly the average regular purchase APR among credit card offers for people with excellent credit. But the best credit card interest rate is one that never applies, which is achievable if you pay off everyday purchases in full each month and use 0% APR credit cards for financing.
Learn more about what currently qualifies as a good credit card APR.
How Does Credit Card Interest Work?
The good news is that credit card interest rates won’t apply if you pay your full statement balance by the due date each billing period. But if you don’t pay in full or you perform a transaction such as a cash advance, interest will begin to accrue daily. The rate per day is the APR divided by 365. You then multiply that by your balance to find the amount of interest you owe that day.
But it’s not quite that simple. All credit card interest rates compound daily. That means that each day you owe interest both on your original balance and on any other interest you’ve already accrued. So the amount of interest you owe each day will slowly increase. That’s why it’s vital to always make a plan to pay off your debt.
Types of credit card interest rates
- Credit Card Purchase APR: The interest rate on things you buy with a credit card that applies when you don’t pay your statement balance in full every billing period.
- Credit Card Balance Transfer APR: The interest rate you owe on balances you move from other credit cards or loans to your card. Typically, you get a low rate (even 0%) for a certain number of months, and then switch over to the regular APR.
- Credit Card Introductory APR: This is a temporary promotional rate that some credit cards offer to new applicants for a certain period of time after account opening. It is lower than the normal APR, often 0%. The average credit card with a 0% introductory APR on purchases gives you more than 12 months without interest. Balance transfer intro APRs last 13 months on average.
- Cash Advance APR: Withdrawing money from an ATM or bank branch using your credit card triggers this rate. The average credit card cash advance APR is 22.53%.
- Penalty APR: This rate may apply after you miss a due date. And whether it applies to future purchases or an existing balance, too, depends on how far behind you get. The average penalty APR on a credit card is 26.19%.
Below, you can find more detailed average credit card interest rates, along with additional information about how credit card interest works and how to avoid it.
Current Credit Card Interest Rates
|Category||Current Average||6 months ago|
|Secured Credit Cards||21.26%||18.95%|
|Student Credit Cards||19.91%||16.25%|
|Business Credit Cards||20.77%||17.89%|
|Store Credit Cards||29.00%||25.27%|
|All New Offers||21.68%||18.89%|
|All Existing Accounts||16.27%||15.13%|
You can also check out our historical credit card interest rates page if you’re interested in seeing how current rates compare to rates from the past..
When Credit Card Interest Rates Can Change
There are four main cases in which your credit card interest rate might change. You have control over some of them, but others are totally out of your hands. Here are the cases in which they can change:
- Your introductory rate expires. It’s great to get a low introductory APR, especially if it’s 0%. But these rates only last a certain number of months, usually 6-24, before the regular APR kicks in.
- You have a variable rate. This means your rate is tied to an index, usually the prime rate that banks use to lend to their most creditworthy customers. As the market fluctuates and that rate changes, so will your card’s interest rate. You’ll know your card’s rate is variable if you see a (V) next to it. Most cards have variable rates, but some have fixed rates not tied to an index.
- You trigger the penalty APR. The penalty APR is higher than your regular APR and can be applied when you miss a payment. It can apply to future purchases after. You can only regain your regular APR on existing balances by paying on time for six months. Your issuer may or may not ever lower your APR on new purchases.
- Your issuer changes the rate. A credit card company can change your interest rate for future purchases at pretty much any time, for pretty much any reason. They’re required by law to give you 45-days’ notice, though.
How to Lower the APR on a Credit Card
The best way to get a lower credit card APR is to get a new credit card with a lower rate than your current card. If you already owe a balance on your current credit card, you could transfer that balance to a card with a low introductory balance transfer APR. Or, if you’re planning a big purchase, you could get a new card with a 0% intro APR on purchases.
Low interest credit cards usually require good or excellent credit for approval, however. If you have a lower score, you should focus on improving it before you apply.
Learn more about how to get a lower credit card interest rate.
How to Calculate the APR on a Credit Card
A credit card’s APR will be listed on your online account and monthly statements, so you won’t have to calculate the rate itself. If you want to calculate the interest charges you may incur on a credit card, use a free credit card interest calculator.