What is the average APR on a credit card?

Group of people talking about the average APR, or annual percentage rate, on a credit card.Image: Group of people talking about the average APR, or annual percentage rate, on a credit card.

In a Nutshell

APR, or annual percentage rate, is one of the key factors you should consider when shopping for a credit card. Here’s what the average APR is and why it should matter to you.
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What is the average credit card APR?

According to the Federal Reserve’s data for November 2023, the average APR across all credit card accounts was 21.47%.

The average credit card APR isn’t necessarily reflective of the APR you’ll receive on a credit card you’re approved for, though. In fact, in February the national average APR of all the credit cards where interest was assessed was even higher, at 22.75%.

And these statistics don’t tell the whole story. The average APR may also vary depending on the kind of card you’re looking at. For example, secured credit cards often come with higher APRs than unsecured credit cards.

Another general rule of thumb? The lower your credit, the higher your APR. Cards aimed at people who need to work on their credit can come with some pretty hefty APRs.

Why does knowing the average APR matter?

When looking at new credit card offers, knowing the average APR can help you compare interest rates to get an idea of the best rates available.

Let’s dig into into what APR means in practical terms and then we’ll highlight some ways you can shop around for a credit card with a competitive APR.

What does APR mean?

A credit card’s interest rate is the price you’ll pay for borrowing money. For credit cards, interest is typically expressed as a yearly rate known as the annual percentage rate.

Although APR is expressed as an annual rate, your credit card company uses it to calculate the interest charged during your monthly statement period.

Generally, credit card companies offer a grace period for new purchases. This period is the gap between the end of your card’s billing cycle and the date your payment is due. With most credit cards, if you pay off your balance in full and have no outstanding cash advances, you won’t be charged interest on new purchases during the grace period.

Heads up, though: If you pay less than the total balance, you’ll pay interest on your outstanding balance.

To calculate how much interest you’ll pay each day you carry a balance, you can convert your annual percentage rate to a daily percentage rate by dividing it by 365. At the end of each day, the credit card company multiplies the current balance on your account by the daily rate. That daily interest charge is added to your balance the next day.

For example, let’s say you have a credit card with an APR of 15%. Your daily rate would be 0.041% (15% divided by 365). If the balance on your card today is $200, today’s daily interest charge would be $0.08 ($200 multiplied by 0.041%).

That 8 cents of interest will be added to your balance tomorrow, for a new balance of $200.08, and so on until you make a payment.

Shopping for a competitive APR

If you pay off your balance in full each month and don’t miss any payments, APR doesn’t have to be your primary concern. You may be better off looking for a card that offers the best rewards, cash back, or perks that fit your lifestyle and spending habits.

But if you carry a balance from month to month or plan on financing a large purchase with plastic, choosing a lower-interest credit card could save you a significant amount on interest and help you pay off the balance faster.

Finding the lowest rate available to you means comparing offers and card terms carefully. Here’s what you should look for.

  • Introductory/promotional APR — Many cards offer an introductory APR (usually 0%) on balance transfers and/or purchases for anywhere from a few months to a year. This can be super helpful, but make sure you read the terms and conditions and pay off your balance before the APR jumps up to its regular rate.
  • Regular APR  After the introductory period, most cards offer a range of variable APRs depending on your credit health. Generally speaking, the lower end of the APR range is reserved for consumers with good to excellent credit. On the other side of the token, the higher APRs are for consumers at the lower end of eligible credit scores. Your actual rate will be determined by the issuer when you apply, but looking at your credit scores before applying may give you a better idea of what to expect.
  • Cash advance APR  Banks and issuers typically charge a higher rate for cash advances, and interest accrues the moment you take the advance — sorry, no grace period here. For this reason, we recommend avoiding credit card cash advances whenever possible.
  • Penalty APR  If you miss a payment, the credit card company may raise your rate in addition to charging you a late fee.

Bottom line

Ultimately, the best way to use a credit card is to pay your balance in full each month, so you never pay interest but get to enjoy all the perks the card can offer. If you do carry a balance, though, a low-interest card can be a great tool to help you pay off debt or finance a large purchase.

Whichever card you choose, remember that a credit card with a low APR is an opportunity to pay down your debt quickly by putting more of your monthly payment toward the principal (the amount of money you originally borrowed before interest is added). Take advantage of that introductory period and low rates to make financial progress on terms that work for you.

About the author: Janet Berry-Johnson is a freelance writer with a background in accounting and insurance. She has a bachelor’s degree in accounting from Morrison University. Her writing has appeared in Capitalist Review, Chase News &a… Read more.