If you’re making credit card purchases, one of the things you want to look at is the annual percentage rate (APR) on the card. The interest rate on a credit card is expressed in APR, and the rate you’ll be approved for will depend on your credit score. But what is a “good interest rate” on a credit card? Let’s look at some factors first.
What is a good interest rate on a credit card?
It is important to consider that the best interest rates on a credit card are reserved for consumers with good credit. According to the credit bureau Experian, a good credit score is 700 or higher.
If you have a good credit rating, you may qualify for the most competitive rates. Yes your credit is not that great, you might be approved for a higher rate, which is how the lender protects itself against the risk of lending you money.
The range of APRs available can vary by credit card issuer, but a rate between 14.65% and 26.93% is typical, according to a report from American News. According to CreditCards.com, the average APR on new credit cards is 17.68%.
It is also important to note that rewards credit cards tend to have higher APRs in general and are generally reserved for consumers with good credit. So the type of credit card you apply for can impact the APR range and the rate you are approved for.
A good interest rate is a low interest rate
A good interest rate on a credit card is a low interest rate. The lowest possible APR is 0%, which is usually advertised as a promotional offer for a credit card and is only available for a specific duration. In many cases, these cards can be balance transfer credit cards, which are used to consolidate debt and save money on interest.
If you have an APR lower than the average APR of around 17%, this can be considered a good interest rate. The lower the rate, the better the APR.
But what’s considered good for you will depend on your credit history, credit score, and overall creditworthiness. The APR you are approved for is based on your creditworthiness in the eyes of the lender.
Why Interest Rates Matter (Or Not)
Getting a good interest rate on a credit card can save you a lot of money in interest, but only if you plan to keep a balance on your credit card. If you pay off your entire balance each month before the due date, you’ll never have to pay interest and the interest rate won’t really matter.
However, if you need your credit card to make purchases that will be paid off over months or years, then the APR is very important. Even a few percentage points more can result in the additional expense of hundreds or thousands in interest.
How to Get Best Rate Approval
If you want to get approved for the best interest rate for a new credit card, you want to make sure your credit is in good shape. Have a strong credit score can help you unlock the best rates.
In order to maintain or improve your credit score, you need to be aware of the balance you are carrying. Although you may be approved for a certain amount on your credit limit, lenders like to see credit utilization below 30%. In other words, you need to keep your balances low and manageable.
The most important thing you can do is repay your loans on time each month. Your payment history represents about 35% of your credit score and is the main influencing factor.
Take these two steps and be careful with opening new ones Lines of credit or taking out additional loans can help.
The bottom line
A good interest rate on a credit card can vary. If you have a good credit rating, you’ll likely be approved for the best rates. If you don’t have great credit, you might have a higher APR. But remember, your APR only matters if you have a balance. If you can commit to paying your balance each month, your APR won’t cost you anything in the long run.
Related coverage of How to do it all: money
