A good credit card APR is 10% or less, but that's significantly lower than the national average, which is nearly 24%. It's important to get as low an APR as possible because it impacts how much you'll pay to carry a balance on your credit card.
Here's everything you need to know about how credit card APRs work and how to qualify for a better one.
How does credit card APR work?
APR stands for annual percentage rate and calculates the percentage of your credit card balance you'll pay each year based on both the interest rate and additional fees, such as an origination fee. The higher your APR, the more interest you'll be charged on your credit card statement if you don't pay off your balance in full each month. APRs usually apply to credit card purchases, as well as balance transfers and cash advances.
What factors affect your credit card APR?
The most common factors impacting your credit card APR include:
● Your credit score: A negative credit history typically means you'll get a higher APR
● Account activity: If you miss a payment or go over your credit limit, you may be charged a penalty APR
● Transaction type: Your credit card may have a different rate attached to purchases, balance transfers, and cash advances
● Current prime rate: Many credit cards have variable interest rates that rise and fall alongside broader market rates
How can you qualify for a lower credit card APR?
Maintaining a healthy credit score (or improving a low score) can help you qualify for a better APR on your credit card. Here are some steps to focus on:
● Make on-time payments for all your debts
● Avoid keeping high balances on your credit cards
● Pay down existing debt
It's also smart to compare multiple credit card offers before choosing one. Just be cognizant of how many you apply for; each one counts as a separate inquiry on your credit report and causes a small drop in your score. But too many can quickly add up!
Is APR the most important thing to consider in a credit card?
APR isn't the only factor to consider when comparing credit card offers. Check out the annual fee, as well as any perks like rewards or cash back programs. If you're considering a balance transfer, look at any associated fees or introductory rates. You may also want to compare credit limits and consider the financial institution's customer service reputation.
How can you find the best credit card for your needs?
Choose the best credit card by comparing all the features and how likely you are to use them. A credit card with a strong travel rewards program doesn't make sense if you prefer staying closer to home. If you think you'll carry a balance for an extended period of time, you may prioritize APR over other factors.
Openland Credit Union offers several different Mastercard credit cards to help you find the right fit. Apply now to check your available terms!
