Home > Credit Cards > Strengthen Your Finances with a Low APR

Comments 0 Comments

Any savvy consumer knows that credit cards play an important role in today’s financial world. They offer convenience and a powerful tool to use in many situations. But just like any great product, credit cards can be misused. The smart credit cardholder understands how to get the best terms and when it is best to use a credit card.

Consumers love their credit cards. According to a recent Federal Reserve report, the average American adult with at least one credit card carries about $5,800 in credit card debt. In recent years this number has been steadily increasing. Americans’ total revolving debt, which is largely made up of credit cards, exceeded $1 trillion for the first time in 2018. One worrisome trend is that in the past year delinquency rates for credit cards are increasing. A credit card is considered delinquent when the holder is behind on a payment, a sign that the holder may have too much debt.

If you’re considering getting a credit card, there are some things to consider regarding APR. A few important questions to ask are: What is a good APR? What is an APR? How does your APR affect your monthly payments?

What is a Good APR?

An APR (Annual Percentage Rate) represents the yearly cost of the funds borrowed. For example, if you charged $2,000 on your credit card and your APR was 20%, you would be paying $400 each year on interest fees. The APR you pay on revolving credit affects your financial health in the following ways:

  • It determines your minimum monthly payments on your debt.
  • It affects your cashflow.
  • It contributes to the final cost of every item you purchase.
  • It can eat into your discretionary income.

The average APR rate for new credit card offers is 19.24%, while it stands at 14.14% for existing cardholders. Rates also vary depending on whether it is a business card, a student card or a store card. Most importantly, average rates for those with excellent credit (14.41%) tend to be much lower than for those with fair credit (22.57%).

If you don’t payoff every monthly payment for your credit card, it’s important to negotiate the best APR you can. A lower APR will reduce your monthly costs, often by hundreds of dollars. For example, that same $2,000 credit card balance with an APR of only 10% will reduce your annual costs by $200.

The Keys to Obtaining a Low APR

In most cases, what constitutes as a good APR is determined by your credit score. Your credit score is essentially determined by five main factors connected with your financial situation.

  1. Payment history: 35%.
  2. The amount owed on balances: 30%.
  3. Credit history: 15%.
  4. How recent new credit lines were opened: 10%.
  5. The type of credit lines used, such as mortgage, car loan and credit card: 10%.

The better your credit score, the lower APR rates you receive on all types of loans. Because a credit score is constantly changing, you can raise your score by making a few changes to your financial situation. This may take some time, but it is possible. Some of the most effective ways to improve your credit score include checking your credit report for errors, making all of your payments on time, opening a secured credit card and clearing up any collections on your record.

Unlike other types of credit, most credit cards come with a variable APR. This means that the credit card company can alter your APR if your creditworthiness changes. If your credit score declines, your APR will likely increase. On the other hand, if your credit score improves, you may be able to negotiate a lower APR. Your APR could also change due to the Federal Reserve raising the Prime Rate for loans.

The Steps for Getting a Low APR Card

It’s easy to apply for a new credit card, but always remember to evaluate the details of each offer. When getting a new credit card, consider the following:

  • Is there an annual fee? If so, how much is it?
  • What is the credit limit? Is this high enough for your needs?
  • What is the APR?
  • Can you consolidate other debt into this card?
  • What paperwork is needed for approval? How long will this take?

If your credit is only fair, you may have to settle for a card that has an annual fee and perhaps a lower credit limit. You may also have to start with a higher APR on purchases.

The Advantages of Having the Right Card

There are other factors beyond APR to keep in mind when shopping for a new card. With the right card in hand you increase your purchasing power in several ways. If you carry a balance, a low APR means lower monthly payments.

It also allows you to pay off your balances more quickly. Not having to worry about an annual fee allows you to use more of your money to paying off your balance. A good credit card enables you to get on solid footing with your finances.

Life is all about making the most of your opportunities. A high APR on a credit card eats into your discretionary income, leaving you less each to spend on those items that make you the happiest. A credit card should work for you, allowing you the freedom to make sensible purchases without being punished through exorbitant interest payments. A good credit card in your wallet has the potential to improve your life in many ways.

Apply for Your Card Now

At Credit.com, it’s easy to find a card that is right for your situation. You can look up your credit score, compare cards, apply for credit cards online, and learn all about the best ways to manage your credit.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team