Edvisors rates credit cards objectively based on credit card features, fees and interest rates, as well as how a credit card compares with similar cards within the same category. "Best" determinations are solely the opinion of Edvisors.
What is APR on a Credit Card?
The annual percentage rate (APR) on your credit card is the yearly interest you accumulate if you carry a continuous balance on your credit card month-to-month. Unless you pay off your credit card balance in full each month, you will continue to be charged interest each month. APR is important to be aware of because it’s the amount you’re charged for borrowing money with your credit card. Making sure that you know the APR stated by your credit card issuer is important so you don’t overextend your budget. It’s also important to take note of the date when any promotional periods for APR on your credit card end, so you’re aware of any changes in what you will be charged. There are also different types of APR you want to be aware of:
- Variable APR: Variable APR may change monthly, quarterly, or yearly based on an underlying benchmark interest rate or index that may change periodically. Since this type of APR is variable, it’s important to keep track of any changes. This option may not be the best for those on a strict budget, since the rate can increase to an amount outside of your fixed budget range.
- Penalty APR: Penalty APR is exactly what it sounds like. When you have a payment returned or miss a credit card payment all together, or generally if your payment is more than 60 days late, your interest rate can be increased as a “penalty” for the missed or late payment. Staying on top of your credit card payments will ensure you’re not hit with an unwanted increase in interest on the balance you’re already responsible for.
- Fixed APR: Though rare, having a fixed APR on your credit card means that your interest rate won’t fluctuate month-to-month. For those on a strict budget, scoring a credit card with fixed APR may be the best option. Another viable option for those on a budget is a secure credit card that allows you to set your own credit limit so you can stay on top of your personal finances.
Ultimately, your APR will be based off a variety of factors. Having a high FICO® credit score (680 or higher) vs. a low credit score (below 680), strong or weak credit history, timely or late payments, in addition to having a card that’s hit the year mark with consistent on-time payments, and more can all affect your APR rate.
What is a Good APR for a Credit Card?
A good APR for a credit card will vary in range dependent upon current market conditions and your credit score. This range will change over the years as a low rate one year might be perceived as a high rate another. With that being said, interest rates can and will fluctuate, but the lower the percentage rate the better. Sometimes, have a high credit score will allow you to qualify for a good (or lower) APR on your credit card and may include benefits such as:
- Paying less in interest over time
- Fewer credit card fees typically associated credit cards for those with good/excellent credit
- Higher limit credit cards
Factors that contribute to a good APR are similar to the factors that positively affect your overall credit report in general. These include having a high credit score, a timely and consistent payment history, paying off loans on time, and not using all the available credit on your credit card from month-to-month.
Factors that negatively impact APR include bad credit, having a high credit utilization ratio (using all or most of the credit available to you), weak payment history, and more. A general rule of thumb when it comes to working towards a good APR is to stay well below your credit limit, pay your bills on time, and not carry a balance each month as much as financially possible.
Ultimately, working towards a credit card with good APR will come down to responsible use of your credit card, responsible spending habits, and paying off your credit card balance each month. When you stay on top of those three habits, you will be well on you way to working towards receiving better credit card options and even being offered rewards credit cards.
Credit Cards with a Low APR
Scoring a credit card with a low APR can take some time, especially if you are in the beginning process of building your credit. However, there are a number of options for those looking to get a credit card with low APR if you already have a high credit score. Depending on the credit card issuer, some may offer a 0% APR during a promotional period as an incentive to apply for their card. The promotional period may only last up to a year, so it’s important to be timely with your payments and not end the promotional period with a high balance. If you still have a balance when the promotional period ends, you may be hit with a high interest rate that can push your balance beyond your budget.
With any credit card, it’s important to review all the terms related to starting a new credit line, whether it has a low APR or not. When you are struggling with bad credit, looking for credit card options that help you build credit and work towards a lower APR may be the best place to start. Then, as your FICO® credit score improves, you may receive a credit card offer with a lower APR and other beneficial products and services as well.
Credit Cards with a High APR
If you have bad credit (i.e. a low credit score), you may notice that you have a higher than average APR on your credit card. Sadly, when you have a high APR, you will pay more interest on any balance you carry over month-to-month than those with low APR rates. For those on a strict budget, a high APR can be a challenge and we cannot stress the importance of using your credit card responsibly and paying your bills on time to help lower this rate over time. Some ways you can lower your credit card APR to receive better card options in the future include:
- Making timely payments
- Making at least the minimum payment on your credit card, don’t carry a balance each month
- Using your credit card responsibly
- Not charging more to your credit card than you can afford
When you build your credit score using these habits, you may qualify for a lower APR in the future. In the meantime, if you have a high APR, it’s important to stay on top of paying down any balance you have as quickly as possible to work towards better card options sooner than later. Keeping track of your credit score while you’re working towards a lower APR is equally as important to ensure you’re on the right track.
Credit Card Options for Those With A Low Credit Score
When you have a low credit score looking for credit cards that help build your overall credit score or applying for a secure credit card where you set your own limit may be the best option. The goal is to ensure that you use any card you apply for responsibly, so you are working towards qualifying for a lower APR on future card offers. We share some of the best credit card options for those with a low credit score below:
Secured Sable ONE Credit Card
This secured credit card has a surprisingly credit check requirement, no SSN requirement for non-US citizens, and no credit history requirement to apply. Some other benefits include:
- Helps build credit history faster than other card options
- No annual fee
- Renew for a non-secure credit card in as soon as 4 months
- Set your own credit limit which can help you stay within your budget
First Progress Platinum Prestige Mastercard® Secured Credit Card
This secured card has no credit check requirement for approval but will require a soft credit pull. This card also reports to all 3 credit bureaus so you can build credit faster. This card also includes access to your credit score 24/7 so you can keep track of what matters. Some other features of this card include:
- $200 refundable deposit
- $49 annual fee
- Bankruptcy will not cause a consumer to be declined for approval
- No credit history or minimum credit score requirement
First Progress Platinum Select Mastercard® Secured Credit Card
This credit card features a quick and easy application process with no credit check requirement for approval. This card helps you establish credit as well as some other useful features:
- Accepted anywhere where credit cards are accepted
- 24/7 online account access
- Usable in all 50 states
- $200 refundable deposit
- No credit history requirement
PREMIER Bankcard® Grey Credit Card
This credit card is great for those looking to build their credit score and there is no credit check requirement to apply. Some other features for this card include:
- Helps customers build credit by encouraging small purchases and monthly payments
- Quick and easy approval application
- A good starter credit card
- Made for people with bad credit