What Is a Credit Card APR? Here’s How It Works and How Interest Can Affect the Cost of Your Balance

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When you carry a balance on a credit card, the interest you accrue is calculated as APR, or annual percentage rate — and it isn’t cheap.

The current average credit card APR is around 16%, according to the Federal Reserve. But rates are rising, and experts expect the increase to continue over the next several months.

If you always pay your credit card bill in full, you may never have to worry about your card’s APR. However, if you’re currently carrying a balance on a card or you have struggled with debt in the past, your credit card’s APR can have a huge impact on your monthly payments.

Here’s what you need to know about credit card APR, and how to avoid high interest costs.

How Does APR Work?

A credit card APR is simply the card’s interest rate expressed in annual terms. It’s the annual rate of interest that applies to any balances you carry on your card. 

You can find your credit card’s APR within the terms and conditions of your credit card account. 

The interest rate you’re assigned depends on several factors, from individual details like your credit history to broader economic conditions. Most credit card APRs are variable and based on the prime rate. The prime rate is tied to the federal funds rate, which is determined by the Fed. 

These underlying rates help issuers determine a range, and then the information in your application is used to assign your individual APR, based on creditworthiness. Once you’re approved for a card, you’ll find your APR within the card agreement. 

However, your card’s ongoing purchase APR really only comes into play when you carry a balance. As long as you pay your credit card balance in full by the due date each month, you won’t accrue interest.

What Are the Different Types of APR for Credit Cards?

Your card will carry a few different types of APRs you should know about, including: 

  • Purchase APR: Your purchase APR is the variable rate you pay when you carry a balance after making new purchases on your card. This is the most common type of APR.
  • Introductory APR: An intro APR is a temporary interest rate that applies for a limited period of time. Often, these are 0% APR offers on new purchases, which can help you pay down a large upcoming expense over time.
  • Balance Transfer APR: A balance transfer APR is charged on credit card balances you transfer from other cards. These are often introductory 0% APR balance transfer offers that can help you pay down existing debt over several months.
  • Penalty APR: Some issuers charge a penalty APR when you pay your credit card bill after its due date or your payment is returned. This APR is typically the highest rate a card issuer will charge, and is a temporary increase from your ongoing purchase APR.

What is Considered a Good APR for a Credit Card?

Credit cards charge higher APRs than other forms of debt — such as personal loans or mortgages — which means a “good” APR is a tricky concept, says credit expert John Ulzheimer, formerly of FICO and Equifax. 

The average credit card APR hovers around 16% today, so any rate around or below that may be considered good. 

You can increase your chances of qualifying for a good APR by practicing good credit habits and increasing your credit score. Pay your balance in full and on time each month, keep your credit utilization low, and avoid approaching your credit limit.  

And, of course, if you never carry a balance, you won’t need to worry about your interest rate at all. Charge only what you can afford to your card each month whenever possible, so you don’t need to revolve a balance and accrue interest over time. 

Pro Tip

If you want to minimize credit card interest in the short-term, sign up for a new credit card with an introductory 0% APR period. While these offers don’t last forever, they can help you save on interest as you pay down large purchases or consolidate existing debts.

How Much Does Credit Card Interest Cost You? 

It’s easy to ignore your credit card’s APR until you’re carrying a balance and see just how much interest can cost you on your statement, says credit expert Gerri Detweiler. “At that point, you may find yourself scrambling for options to reduce that cost.” 

It helps to have a general understanding of how much interest you’ll pay on a balance — and how paying a higher interest rate can make the amount you owe escalate quickly. 

Here’s an example of how much interest you would pay on a credit card with a balance of $5,000, given three different purchase APRs and a minimum monthly payment. 

Monthly paymentTotal interest chargesMonths to pay off
$5,000 credit card balance at 9% APR$87.50$3,373.39251 months 
$5,000 credit card balance at 16% APR$116.67$6,126.19269 months
$5,000 credit card balance at 24% APR$150$9,332.25285 months
***Minimum payment is calculated as interest plus 1% of the balance

How to Get a Lower APR on a Credit Card

Though credit cards carry very high APRs, there are options for lower interest rates. The best way to guarantee a low interest rate — at least for a limited time — is with a 0% APR card. These cards offer no interest on either new purchases or balance transfers (or both) for several months after account opening. 

As an example, the Chase Freedom Unlimited® has an introductory 0% APR on purchases and balance transfers for 15 months, followed by a variable APR of 17.24% to 25.99%. Some of the best offers available today have 0% APR for up to 21 months.

You may also choose a card with a lower ongoing APR, in case a time comes when you need to borrow from your credit limit. The better your credit, the more likely you’ll be to qualify for a lower APR.

“Credit cards often advertise a range of interest rates, and the lowest rates usually go to those with strong credit,” Detweiler says. Still, it’s rare to find a card with an APR less than 10%, even if you qualify for the lowest rate within an issuer’s APR range. 

The best way to save on interest is to avoid taking on APR charges altogether. By charging only what you can afford to pay off in full and on time each month, not only can you avoid costly interest charges, but you’ll improve your credit and be able to take full advantage of any rewards and benefits on your spending.

Editorial Independence

As with all of our credit card reviews, our analysis is not influenced by any partnerships or advertising relationships.

Best 0% or Low APR Credit Cards 

Good for Long Intro APR Wells Fargo Reflect® Card
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Wells Fargo Reflect® Card
Editor’s Score: (4.2/5)
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Good for Long Intro APR Wells Fargo Reflect® Card
Editor’s Score: (4.2/5)
  • Intro APR:
    0% intro APR for up to 21 months from account opening
  • Annual fee:
    $0
  • Regular APR:
    15.24% – 27.24% Variable APR
  • Recommended credit score:
    670-850 (Good to Excellent)

NextAdvisor’s Take

Pros
  • Long intro APR
  • No annual fee
  • Cell phone protection against damage or theft
Cons
  • No rewards
  • High APR after the introductory offer ends
  • Must meet requirements to get up to 21 months of 0% intro APR
The Bottom Line
The no annual fee Wells Fargo Reflect Card offers an initial 0% intro APR on purchases and qualifying balance transfers for 18 months from account opening, with the potential for an intro APR extension for 3 months with on-time minimum payments during the introductory period. After that, there will be a variable APR of 15.24% to 27.24%. It’s light on added perks and has no rewards, but carries one of the longest 0% intro periods available today.

Additional Card Details

  • Get a 0% introductory APR for up to 21 months from account opening on purchases and qualifying balance transfers — start with a 0% intro APR for 18 months from account opening on purchases and qualifying balance transfers, then unlock three additional months with on-time minimum payments during the 18-month offer, then a 15.24% to 27.24% variable APR thereafter
  • Cell phone protection against damage or theft worth up to $600 when you pay your bill with your eligible Wells Fargo card (subject to a $25 deductible)
  • Get access to My Wells Fargo Deals: earn cash back as an account credit when you shop, dine or enjoy an experience using your eligible Wells Fargo card
  • Roadside dispatch
Good for Low Fees Citi Simplicity® Card
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Citi Simplicity® Card
Editor’s Score: (4.0/5)
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Good for Low Fees Citi Simplicity® Card
Editor’s Score: (4.0/5)
  • Intro APR:
    0% for 12 months on Purchases
  • Annual fee:
    $0
  • Regular APR:
    16.99% – 26.99% (Variable)
  • Recommended credit score:
    670-850 (Good to Excellent)

NextAdvisor’s Take

Pros
  • 0% Intro APR for 21 months for balance transfers and 12 months for purchases (then variable APR 16.99% to 26.99%)
  • No annual fee
  • No late payment fees or penalty APR
Cons
  • No rewards
  • No welcome offer
  • 5% balance transfer fee ($5 minimum)
The Bottom Line
The Citi Simplicity Card has one of the longest 0% introductory periods available for balance transfers, at 21 months from the date of your first transfer. For purchases, cardholders can benefit from 12 months of 0% interest, making this a great card option for consolidating debt or financing planned major expenses (16.99% – 26.99% variable APR thereafter).

Additional Card Details

  • Balance transfers must be completed within 4 months of account opening
  • Includes Citi Identity Theft Solutions protection
  • Choose your payment due date
  • Digital wallet compatible
Good for Rewards and Balance Transfers Citi® Double Cash Card
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Citi® Double Cash Card
Editor’s Score: (4.9/5)
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Good for Rewards and Balance Transfers Citi® Double Cash Card
Editor’s Score: (4.9/5)
  • Introductory balance transfer rate:
    0% intro for 18 months on Balance Transfers
  • Annual fee:
    $0
  • Regular APR:
    16.24% – 26.24% (Variable)
  • Recommended credit score:
    670-850 (Good to Excellent)
Rewards rate:

Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.

NextAdvisor’s Take

Pros
  • Great limited time welcome offer
  • Flat cash back on every purchase
  • 18-month 0% intro APR for balance transfers (16.24% to 26.24% variable APR thereafter)
  • No annual fee
Cons
  • 3% balance transfer fee ($5 minimum) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5)
  • Delayed cash back rewards if you carry a balance
The Bottom Line
The Citi Double Cash Card has a straightforward rewards structure that gets you up to 2% back on everything — which is great if you’re looking to maximize savings on every purchase you make. It also shines as a debt management tool, with an 18-month 0% intro rate for balance transfers (16.24% to 26.24% variable APR thereafter). And for a limited time, you can benefit from the great welcome offer of $200 after spending $1,500 within the first six months.

Additional Card Details

  • Extra incentive to pay down your balance in full: You’ll earn only 1% cash back when you make a purchase, and the other 1% when you pay it off
  • 18-month 0% intro period on balance transfers, 16.24% to 26.24% variable APR thereafter
  • Redeem cash back for statement credits, direct deposit, check, or convert cash back value to Citi ThankYou points
  • Balance transfers must be completed within 4 months of account opening and a 3% ($5 minimum) fee applies, After that, your fee will be 5% of each transfer (minimum $5)
Good for Lower Ongoing APR PNC Core® Visa® Credit Card
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PNC Core® Visa® Credit Card
Editor’s Score: (3.9/5)
Learn more externa link icon At our partner’s secure site.
Good for Lower Ongoing APR PNC Core® Visa® Credit Card
Editor’s Score: (3.9/5)
  • Intro APR:
    0% for the first 15 billing cycles following account opening.*
  • Annual fee:
    $0*
  • Regular APR:
    9.99% – 19.99% (Variable)
  • Recommended credit score:
    740-850 (Excellent)

NextAdvisor’s Take

Pros
  • No annual fee
  • 0% intro APR on purchases and balance transfers for the first 15 billing cycles
  • $100 welcome offer
  • Relatively low ongoing APR after intro period
Cons
  • No rewards or cash back opportunities
  • 3% foreign transaction fee
  • Few added benefits
The Bottom Line
The PNC Core Visa credit card* doesn’t offer cash back or travel rewards, but it does offer a solid 0% introductory APR on purchases and balance transfers. This 15-billing cycle no-interest period (9.99% to 19.99% variable APR thereafter) makes it a good option for people who have a large purchase planned or want to transfer a balance from another card.

Additional Card Details

  • $100 bonus after you spend $1,000 or more in first three billing cycles
  • Balance transfer fee of 3% or $5, whichever is greater, within the first 90 days
  • Access to travel and emergency assistance services
  • $0 fraud liability and PNC Easy Lock