Credit card APR ranges, explained
Quick insights
- Annual percentage rate (APR) is the yearly interest rate you’re charged on unpaid credit card balances. It’s essentially the cost of borrowing money if you carry a balance month to month.
- Credit cards often list APR in ranges because the exact APR you get depends on your creditworthiness and market factors like the prime rate.
- Different types of APRs may apply. For example, purchase APR, balance transfer APR, cash advance APR and penalty APR can each be different.
If you want to open a new credit card, you may want to start by comparing features to decide which one is best for you. One category you’ll likely see listed within the terms of every credit card is the card’s APR.
What does credit card APR mean?
APR, or "annual percentage rate," is the yearly cost of borrowing money on a credit card, shown as a percentage. It’s essentially the card’s interest rate. Credit cards can have different APRs for various types of transactions, such as purchases, balance transfers and cash advances. The most common is the purchase APR, which applies when you carry a balance from purchases and are charged interest for not paying off your full amount.
There are two types of purchase APR that you may see for a credit card:
- Fixed APR: Fixed rates typically don’t change unless you’ve been habitually missing payments, or your credit score recently decreased. In these cases, your issuer is usually required to send you notice at least 45 days before your new rate takes effect. Your rate may also change if you have an introductory APR that expires. Fixed rates are generally less common than variable rates.
- Variable APR: If a card has a variable rate, you’ll be given a range of rates within which your APR may fall into when you’re approved for the card. In these cases, the rate is influenced by several factors, including the prime rate, which is set by banks and lenders influenced by the federal funds rate set by the Federal Reserve. Issuers are not required to give you advanced notice when they change your rate if it falls within the range provided. If it falls outside that APR range, they generally must provide notice 45 days before it takes effect.
What are the different APR ranges?
If a credit card lists an APR range, it means the card has a variable APR. This rate may change over time based on the prime rate and other factors. For example, the Chase Freedom Unlimited® credit card offers a variable APR within a set range after the introductory period ends. The exact APR you receive is typically based on your credit profile and overall creditworthiness.
While the overall rate may fluctuate within that range depending on the prime rate, your personal rate within that range will be determined by your credit history. Issuers often consider factors such as:
- Credit score
- Payment history
- Credit utilization
- Current debt
There are no universal credit card APR ranges. Each issuer can have their own, and even different cards from the same issuer may have different ranges.
Can you change your APR?
If you’re looking to change your APR, it’s likely because you want it to be lower. To do this, you’ll likely need to improve what issuers call “creditworthiness.” This is essentially how trustworthy a lender determines you to be based on your reliability in paying borrowed money back in the past.
If you want a lower APR, you can contact your credit card issuer and request one—this request may be approved or denied at the issuer’s discretion. There are a few things, however, that you can concentrate on if you want to help boost your chances for a successful request:
- Monitor your credit score: Keep an eye on your credit score so that you can catch any unexpected decreases. If you notice your score changes when you aren’t expecting it to, you can check your credit report for anything unusual, or to find out if you have a habit that’s negatively impacting your score.
- Make on-time payments: Payment history is an important factor for lenders, so make sure you’re making at least the minimum payment on time every month.
- Lower your utilization: If you’re able, try to get your credit utilization below 30%. This can help boost your credit score and show lenders you’re not relying too heavily on borrowed money.
- Don’t keep applying for accounts: If you’re looking for a new credit card, don’t apply for many at one time, as this can hurt your credit score. Do your research to find a card that you think best fits your circumstances and apply to that one to start.
If you do these things and keep your credit score up and your credit report healthy, you may have a better chance of decreasing your credit card APR to the lower end of the range.
In summary
Credit card APRs can be either fixed or variable. If a credit card has a variable rate, your APR will fall within a given range. Your personal APR within this range will depend on factors like your repayment history, credit score, credit utilization and the federal prime rate. Always make sure to read the terms and conditions of your credit card carefully to make sure you understand how the APR works for your specific card.
FAQs
1. How do credit card companies determine a customer’s APR?
A number of factors go into determining a credit card company’s APR, including the federal prime rate. Credit card companies typically consider the customer’s credit score, credit history, income and the current market interest rates. These factors can help assess the customer’s creditworthiness.
2. How do you check your APR on a credit card?
You can find your APR by checking your credit card issuer’s mobile app, online account, your latest statement or the card’s terms and conditions.
3. How do I request a lower APR?
If you’re interested in lowering your APR, you can contact your credit card issuer. Provide positive information about your payment history and why you would benefit from a lower APR.
