The Annual Percentage Rate (APR) on your credit card may increase from time to time. Factors that increase your APR may include federal rate increases or a drop in your credit score. By identifying changes to your APR and understanding the actions that led to your increased rate, you can take steps that may help reduce your interest charges in the future.
Why did my APR increase?
Your APR rate may have increased due to the following reasons:
- You missed a payment: Penalties for missing your monthly credit card payment include late fees as well as increases to your APR. Consistently paying less than the minimum payment amount can also generate additional interest rate charges on your monthly statement.
- High credit card balance: If you continually carry over your growing credit card balance from the previous month, your credit issuer may increase your APR.
- Your promotional period ended: If you recently got a new credit card and saw an increase in your interest rates, your promotional low-interest period may have ended. You can check your monthly statements to keep track of when your promotional period ends. Balance transfers also have zero or low-interest periods that end after a period of time.
- Your card has a variable rate: If your credit card APR is a variable rate, your APR may increase if federal rates increase. Your credit issuer will likely send a letter or email notifying you of these changes, so it's important to read correspondence and notifications from your bank or credit card company.
- You took out a cash advance: If you recently took out a cash advance, you may have activated a cash advance APR. Cash advance APRs usually have higher rates than a purchase APR, but this can vary depending on the credit card company.
How do I avoid paying interest rates?
If your credit card balance is paid in full each month, you won't have to worry about paying those additional interest charges. If you have a credit card with a promotional period, be aware of the expiration date so you can pay off your balance before it expires. Your credit card issuer may lower your interest rate when your credit score improves because of a reduction in your balance, which may reduce the amount of interest you pay over time.