Excellent: Capital One SavorOne Cash Rewards Credit Card (19.99% - 29.99% (Variable)). Good: Capital One QuicksilverOne Cash Rewards Credit Card (30.74% (Variable)). Fair: Citi® Diamond Preferred® Card (0% intro APR for 21 months on Balance Transfers and 0% 12 months on Purchases, followed by 18.24% - 28.99% Variable).
Penalty APRs are part of why credit card overspending can be so dangerous, as they may reach higher than 29.99% when a payment is at least 60 days late. Interest rates this high would be unthinkable in most other common lending contexts.
A high APR is one that exceeds the national average of 20.40% on credit cards that charge interest (that average is from Federal Reserve data for the fourth quarter of 2022).
The annual percentage rate, or APR, refers to the total cost of your borrowing for a year. It includes the interest you must pay plus any additional fees. All personal loans and credit cards have an APR.
There is no federal regulation on the maximum interest rate that your issuer can charge you, though each state has its own approach to limiting interest rates. State usury laws often dictate the highest interest rate that can be charged on loans, but these often don't apply to credit card loans.
Credit card APR is often between 16% and 29%. That's a wide margin dictated by several things, including: Your creditworthiness. The type of credit card you open.
Key takeaways. Your credit card APR can go up if the prime rate changes, you paid your credit card bill late, your intro APR offer ended or your credit score dropped. If your APR increases, you can work on paying down your balance or transfer your balance to a card with a low or 0 percent intro APR offer.
The APR on a credit card is an annualized percentage rate that is applied monthly. If the advertised APR on a credit card is 19%, for example, then an interest rate of 1.58% will be imposed on the outstanding balance each month. As mentioned, any given credit card may come with several different APRs attached.
The bottom line on APR
Remember that APR is only applied if you're carrying an outstanding balance on your card. You can typically avoid paying any interest charges if you pay off your card balance before the statement period ends each month.
A 29.99% card APR is too high, even with bad credit.
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.
While it's easy to say that you should always look for credit cards that offer APRs at or below the national average, a good purchase APR will depend on your credit score. People with below-average credit scores tend to be offered higher interest rates than people with good or excellent credit.
If you have a credit card with an APR much higher than the national average, negotiating with your issuer may help you bring your rate to this level or lower.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Factors that increase your APR may include federal rate increases or a drop in your credit score. By identifying changes to your APR and understanding the actions that led to your increased rate, you can take steps that may help reduce your interest charges in the future.
If you'd like to avoid paying interest on your credit card, you have two options. You can pay off your balance before your grace period ends, or you can apply for a credit card that offers a 0 percent intro APR on purchases for a time.
Penalty APR: When you miss a payment or make a payment far past your due date (generally 60 past-due), some cards will impose a penalty APR as high as 29.99%. In addition to an increased APR, you risk termination of any intro 0% APR offers and damage to your credit score.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Customers can negotiate with credit card companies for lower interest rates. Seeking to negotiate a credit card rate can be a good solution in a variety of situations. Requesting a lower rate should not affect your credit score or credit account.
Bankrate has been tracking credit card rates since 1985, and as 2023 draws to a close, they've never been higher. As of December 27, 2023, the average credit card rate was 20.74 percent. That figure has jumped 4.44 percentage points since the beginning of 2022 — the most we've ever seen in a two-year span.
People with higher credit scores tend to qualify for lower interest rates because they have a record of consistently paying back debts on time. Their proven history with credit is more desired by lenders, who are always looking to minimize risk.
Closing a credit card can increase your credit utilization ratio, which is the amount of credit you're using compared to your total available credit. It can also leave you with a lower average age of credit and fewer types of credit accounts. This can lead to a dip in your credit score.
The average annual percentage rate (APR) for credit cards where the user has a balance is 22.75% as of November 2023, according to the most recent numbers from the Federal Reserve. But the average credit card APR isn't necessarily the rate you'll get when you open a card.
One way to lower the interest rate on a Capital One credit card is to call customer service and try to negotiate a reduced rate. Alternatively, if your financial situation is especially dire, Capital One offers a credit card hardship program.