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Earn 5X points on travel booked through Chase, 3X points on dining, online grocery purchases, and select streaming services, and 1X points on other purchases. This card has a $95 annual fee.
Earn 6% back on up to $6,000 spent at U.S. supermarkets each year (then 1% back), 6% back on select U.S. streaming services, 3% back at U.S. gas stations and on transit, and 1% back on other purchases. $0 intro annual fee for the first year, then $95 per year.
Credit card interest charges are determined using an APR, or annual percentage rate. An APR represents various fees a credit card charges as well as the interest rate.
Interestingly, credit card interest actually accrues on a daily basis and not an annual basis. Credit card issuers determine daily interest based on the average balance on your card, which is the amount you owe minus any payments or credits.
Another important factor to note about your APR is that you don’t have to pay any interest if you pay your bill in full before its due date. Since interest charges tend to be on the high side, this is a goal you should be striving for anyway.
How credit card APRs are determined
Most card issuers determine credit card APRs by adding a specific number of percentage points to the prime rate.
The prime rate is nothing more than an interest rate banks and lenders use to set rates for various financial products, including personal loans, auto loans, lines of credit, and credit cards.
As you look for the interest rate on any given card, you’ll notice right away that they advertise a range of potential APRs. Generally speaking, consumers are assigned interest rates within the advertised range based on their credit score, their credit history, and other factors.
As an example, the popular Chase Sapphire Preferred® comes with a variable APR which they show as a range. Individuals with good or excellent credit scores are more likely to qualify for a low interest rate on that scale, whereas those with “fair” credit may be assigned a rate on the higher end.
Also be aware that credit cards can charge different interest rates in different situations.
By taking the time to understand how different interest charges work, you can take steps to avoid interest payments completely.
Purchase APR
A purchase APR works exactly how it sounds. This type of interest rate is charged on new purchases you charge to your card that are not paid off within your card’s grace period — or the time between the end of your billing cycle and your bill’s due date.
Balance transfer APR
Balance transfer APRs are applied to balances you transfer from other credit cards and loans. Interestingly, balance transfer APRs only apply from the date you actually complete a balance transfer, and they are often offered on a temporary basis.
Introductory APR
Sometimes credit cards offer an intro APR in order to entice people to sign up. Introductory APRs can be as low as 0%, and they can apply to both purchases and balance transfers for a period of time measured in months or billing cycles.
Cash Advance APR
A cash advance APR can come into play when you use your card to get cash from an ATM. Cash advance APRs are typically higher than the purchase APR or balance transfer APR on your card.
Penalty APR
Finally, you can be charged a penalty APR if you pay your bill past its due date, or if you let your account fall into default. The penalty APR is the highest interest rate you can be charged.
How to calculate a credit card’s APR
When you apply for a credit card, you’ll automatically be assigned an APR that will apply to purchases you don’t pay off before your bill’s due date. You may also be notified of any intro APR, balance transfer APR, cash advance APR, or penalty APR your card charges.
However, credit card interest actually accrues on your revolving balance on a daily basis and not an annual basis. Imagine you have an average daily balance of $2,000 on your credit card, and that your credit card’s APR is currently 18%.
To figure out the monthly interest charges on your credit card based on your APR, you can use the following formula:
1
Convert your annual interest rate to a daily interest rate.
You can do this by dividing your credit card’s APR by the number of days of the year, or 365. In this case, dividing 18% by 365 leaves you with a 0.049% daily interest rate.
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2
Figure out your average daily balance.
You can do this by figuring out the balance on your card every day during a billing cycle. From there, you would add up those numbers and divide it by the number of days in your billing cycle. For the sake of simplicity, we’re going to say your average daily balance is $2,000.
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3
Calculate the monthly finance charge based on your APR and your average daily balance.
You can do this by multiplying your average daily balance by the APR and the number of days in your billing cycle. Once you have that figure, you will divide it by 365 days. In this example, ($2,000 daily x 18% APR) multiplied by a 30-day billing cycle) / 365 days = $29.58 in monthly interest charges.
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With the interest charges added, your outstanding balance would be $2,029.58. If you make a monthly payment of $100, your balance lowers to $1,929.58. Assuming you don’t purchase anything else using this card and the balance remains the same, your interest charges each month will get lower as your balance decreases. At this rate, it would take you 24 months to pay off your card fully, and you would have spent $388.71 on interest charges.
Fixed vs. Variable APRs
Very few cards come with a fixed interest rate like personal loans do, although there are some exceptions out there. If you do find a credit card with a fixed APR, this means your interest rate will never change.
For the most part, credit cards use variable interest rates that are tied to the prime rate. This means that interest rates can go up or down based on market conditions, and that credit card APRs can go sky high when other interest rates increase.
What is a good APR for a credit card?
The average credit card APR is currently just over 22%.
While that may seem high, APR rates have skyrocketed in 2023, and are the highest they have been in decades. This means any interest rate below the current threshold of 22% can be considered “good,” although it’s important to remember that credit cards charge higher interest rates than other financial products like personal loans.
Also note that it’s possible to find a low-interest-rate credit card with an APR as low as 12% in some scenarios. In some cases, credit cards also offer an intro APR for a limited time, usually up to 21 months or billing cycles.
If you have bad credit, on the other hand, a good APR will look totally different for you. In fact, individuals with poor credit are lucky to be approved for a credit card at all, let alone one with an average APR.
How to get a good credit card APR
If you want a credit card with a low interest rate, you will want to make sure you compare cards based on the card issuer.
Other tips that can help you score a low-interest card include the following:
Build good credit
You’re more likely to qualify for a low-interest-rate credit card if your credit score is in good shape. Typically, individuals with FICO scores of 670 or higher qualify for the best low interest offers.
Look for a card with an intro APR
Many credit cards offer 0% APR on purchases for a limited time. Cards in this niche can help you avoid interest completely for up to 18 months or longer. Just keep in mind that your rate will revert to the regular APR once your introductory period ends.
Consider a balance transfer credit card
Some credit cards also offer an introductory APR on balance transfers for a limited time. These offers can help you consolidate and pay down credit card debt at 0% APR for up to 21 months. Just keep in mind that a balance transfer fee will apply, which is usually around 3%.
Compare low-interest cards
Some cards offer a lower regular APR from the start, so make sure to compare cards and their rates before you apply.
Consider more than one card issuer
Make sure to consider credit cards from different issuers including Citi, American Express, Discover, Capital One, and more. That way, you’ll get an idea of the best credit card offers from all the major banks.
Negotiate your rate
You should also call your card issuer to ask them to lower your credit card’s APR. According to a recent study, 76% of consumer requests for a reduction of APR rate were granted by card issuers in 2022. Even if your card issuer isn’t willing to honor your request, you won’t know unless you check.
Average credit card interest rates by credit score
According to a 2023 Consumer Financial Protection Bureau (CFPB) report called the Consumer Credit Card Market, APRs reached new highs in 2022, with the average APR reaching 22.7% and the average EIR being 17%.
The CFPB prefers to use EIR (effective interest rates) to measure how much interest was paid, rather than just the APR. EIR is calculated by taking the total amount of interest charged per year divided by the total balance at the end of the cycle, to determine how much interest was actually paid by consumers at each credit level.
At the time of the report, here’s how average effective interest rates for credit cards break down by credit scores:
Credit Score
Average Effective Interest Rate (EIR)
Deep Subprime (Credit score of 579 or below)
23%
Subprime (Credit score of 580 to 619)
22%
Near Prime (Credit score of 620 to 659)
20%
Prime (Credit score of 660 to 719)
18%
Prime Plus (Credit score of 720 to 799)
15%
Superprime (Credit score of 800+)
9%
Overall
17%
Other credit card factors to compare
Since you won’t have to worry about credit card interest charges if you pay your balance in full each month, there are additional factors you should consider as you compare different cards and offers.
As you search for a low-interest credit card, make sure you consider the following:
Credit card fees
There are a variety of fees credit cards can charge, and this includes an annual fee that can range from $19 all the way up to $695. While credit cards with the highest annual fee tend to offer a ton of perks and features, these fees may not be worth it unless you can take advantage of all the benefits you receive.
Other fees to watch out for include foreign transaction fees, which are charged by some cards on purchases you make abroad. Other potential fees include late fees, returned payment fees, balance transfer fees, and cash advance fees.
Welcome offers
Depending on your card issuer or credit card company, you may also be eligible for a new customer bonus the first year. That’s because many credit card companies hand out sign-up bonuses to consumers who can meet a minimum spending requirement within the first few months of account opening. These welcome offers may come in the form of travel reward points, but they may also come in the form of cash back or statement credits.
As you look for the right credit card for your needs, make sure to consider cards that can reward you with bonuses of $500 or more right off the bat.
Earning rewards
Also note that many cards offer ongoing rewards for each dollar you spend, and that these rewards can come in many different forms. For example, flexible travel credit cards tend to offer points that can be redeemed for travel through a portal, point transfers to hotel and airline programs, statement credits, merchandise, and gift cards. Meanwhile, cash back credit cards tend to offer reward points that are mostly good for statement credits or gift cards.
Some cards offer a flat rate of rewards for each dollar you spend, yet others offer bonus rewards in specific categories and a flat rate on other purchases. Ideally, you would settle on a rewards card that offers the most points in categories you spend a lot in.
If you’re going to use a credit card, you might as well choose one that will reward you for your purchases. Just keep in mind that rewards credit cards tend to charge a high APR, so you’ll want to pay your balance in full each month.
Credit card company rewards programs
If you’re interested in earning rewards with a credit card, you should also take the time to compare credit card rewards programs. Each of these programs work differently, so points you earn with a Citi credit card will function differently than if you earned them with a card from Chase or the best American Express card.
By comparing rewards programs and how they work for each cardholder, you can make sure you wind up with rewards you can actually use.
Introductory offers
In addition to the existence of a low APR, also check for intro APR offers for purchases or balance transfers. These introductory rates can often be as low as 0% APR for up to 21 months.
While an introductory APR won’t help you save money on interest forever, they can be helpful for your finances in the short-term.
Eligibility
Also keep your eligibility in mind, along with the fact that the best credit card offers typically only go to those who have exhibited creditworthiness. In fact, most of the top rewards credit cards only go to those with credit scores over 700.
If you have bad credit, you will have a limited number of credit cards to choose from and you may have to settle on a card with more fees and a high APR.
The bottom line on credit card APR
If you always pay your credit card bill in full and you plan to remain debt-free for the long haul, you don’t need to worry too much about your credit card’s APR. As long as you pay your bill in full during your card’s grace period, you’ll never pay a dime in interest.
Then again, it never hurts to compare cards based on APR, rewards, fees and other important factors. The right card for your wallet should have a combination of perks and benefits you love, and a low interest rate can come in handy in the future.
A good APR is anything under 22% – which is the average APR for credit cards in America. For an excellent APR, aim for 18% or less. This is considered an extremely good APR as it is what you could expect to receive with excellent credit.
Holly D. Johnson is an award-winning personal finance writer who covers topics like insurance, investing, credit and family finance. As a leading voice in the travel and loyalty space, Johnson has traveled with her family to more than 50 countries over the last decade.
The author has also written extensively on the power of household budgeting, and she even co-authored a book on the topic. Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love was originally published in 2017, and it teaches families how to use zero-sum budgeting to reach their financial goals. She is also the co-owner and founder of the family finance and travel website, ClubThrifty.com.
Johnson’s 10+ years of writing have focused on helping families make important financial decisions at each stage of their lives. The author also applies the financial principles she teaches to her own life, and she is currently on track to retire in her late 40’s with her partner. She currently lives in Central Indiana with her husband and children, and she is a regular contributor for Bankrate, CNN, Forbes, U.S. News and World Report Travel and many other notable publications.
* Opinions expressed here are those of the LA Times Compare Cards Team and have not been reviewed or approved by any advertiser or entities included within this content. See our editorial policy for more details.
All products or services are presented in this content without warranty. The information, including card details such as rates and fees, is accurate at the time of publish. Please visit each bank's website directly for the most current information.
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