If you’re relatively new to the world of credit cards — or even if you’re not — you probably have a few questions about an important concept: the annual percentage rate, or APR.
In the simplest terms, the APR represents the annual cost you pay to borrow money from a lender or credit card issuer. It’s the interest rate you pay on a credit card — but only if you don’t pay your card balance by the end of the government-mandated “grace period” (at least 21 days, by law).
So what’s a good credit card APR? And how can you avoid paying it, or find cards with a low or even zero APR?
What is a good credit card APR?
According to the Federal Reserve, the average credit card APR tends to hover between 14% and 18%. When it’s below that, you might consider it a good APR for credit cards.
This TPG guide to the best credit cards with 0% interest is a great place to start your research on current low-APR credit card options, which offer a decreased or waived introductory APR for the first year or so of card ownership.
Lowering your APR on a card
Generally speaking, low-APR credit cards usually require a good credit score — around 690 or higher — to qualify. They also offer fewer perks and benefits than high-APR premium cards. Assuming you have a reasonably good credit score, it’s all a balancing act of what you want out of a card — a low APR and minimal rewards, or a high APR and lavish perks.
If you’re looking to create or rebuild your credit history, you’ll want to start off with secured credit cards to build that trust with credit issuers.
Some cards have what’s called a variable APR, meaning an APR that goes up or down based on your credit score and payment history. The easiest way to lower your APR is to make on-time payments in full. Also, lower your credit utilization (meaning don’t use more than 30% of your available credit) and avoid applying for several credit cards at once. All these actions will increase your credit score.
In an ideal world — if you’re following TPG’s 10 commandments of credit card rewards — you never pay interest on any of your cards, so APR is a non-starter. But if you follow these tips, and prioritize applying for low-APR and zero-APR cards, you can minimize the stress that credit card interest might bring you.