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What is APR on a Credit Card?
The annual percentage rate (APR) on your credit card interest you’ll pay over a year if you carry a balance from month to month. Knowing your card's APR is key because it tells you how much borrowing money will actually cost. Pay close attention to when any promotional APR periods end so you’re not caught off guard by unexpected charges. Understanding the different types of APR can make a big difference in managing your budget and staying in control of your finances.
- 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, a high credit utilization ratio (using all or most of the available credit), weak payment history, and more. To work towards a good APR, it's important to stay well below your credit limit, pay bills on time, and minimize carrying a balance each month. Ultimately, achieving a credit card with a good APR relies on responsible credit card use, sound spending habits, and paying off the balance monthly. By prioritizing these three habits, you'll be on your way to accessing better credit card options and even earning rewards.
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.
When dealing with any credit card, it's vital to carefully examine all terms associated with initiating a new line of credit, regardless of whether it offers a low APR. If you're facing challenges due to poor credit, opting for credit card options that aid in credit building and pave the way towards a reduced APR could be an ideal starting point. Subsequently, as your FICO® credit score enhances, you might secure a credit card offer featuring a lower APR alongside other advantageous products and services.
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
Start building your credit with as little as a $200 security deposit. Use is reported monthly to all three major credit bureaus. Start establishing your credit today!
- 1% Cash Back Rewards On Payments
- No Credit History or Minimum Credit Score Required
- Choose Your Own Credit Line with up to a $2,000 Security Deposit.
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
