The annual percentage rate (APR) is how credit card companies calculate interest charges on unpaid balances. Understanding what credit card APR is can help you manage your debt and make smart choices about how to use your credit cards. There are different types of credit card APRs, and the terms and conditions for your cards should list them. The most common APR is the purchase APR, which is charged on new purchases that aren’t paid in full by the due date of your billing cycle. Many cards also offer an introductory APR, which may be lower (or even 0%) for a certain period of time on purchases, balance transfers, or both.
Some cards also charge an additional APR or penalty APR if you miss payments or exceed your limit. These rates are typically much higher than standard APRs. Other types of APRs include a balance transfer APR, which is the rate charged on existing card balances transferred to the card, and cash advance APR, which is the rate charged on cash advances. Credit card issuers decide which rate to charge you based on your creditworthiness, and each person’s APR will vary from one to another. The good news is that you can often find great deals on credit card APRs by shopping around and looking for low-interest-rate cards, which tend to have fewer rewards like high cash-back earnings or bonus miles.
Best APR for a Credit Card
A good credit card APR depends on a variety of factors, some within a borrower’s control and others not. The best APR for a credit card will typically be determined by a borrower’s creditworthiness or how much risk they pose to the issuer. This is based on things like their credit score, debt-to-income ratio, and other financial records. A 0% credit card is the best way to avoid interest altogether on large purchases or reduce existing debt. However, such cards typically require a high credit score to qualify, and the 0% offer only lasts for a limited time after account opening.
Once the introductory APR period ends, cardholders must pay the regular purchase APR, ranging from 15% to 28%. Additionally, a credit card may have different APRs for balance transfers, cash advances, and other types of transactions. This is also dependent on a credit card’s terms and conditions, which will be outlined in the terms and conditions document. In addition, credit card holders can try to negotiate with their issuers for lower interest rates. This is particularly effective if a cardholder has shown that they can manage their credit responsibly, including paying on time and limiting new applications for additional lines of credit. Credit card issuers will usually want to keep their customers and reward responsible behavior.