Credit card APR ranges explained

If you want to open a new credit card, you may start comparing features to decide which one is the best for you. One category you'll likely see listed within the terms of every credit card is the card's APR. What are credit card APR rates? Let's learn more.

What are credit card APR rates?

APR stands for "annual percentage rate," which represents the total cost of borrowing on a credit card. From a more general perspective, it's generally considered to be the credit card's effective interest rate. When it comes to credit card APR, there are multiple rates you should be aware of. Rates can differ between transactions, such as balance transfers, purchases and cash advances. However, purchase APR is the one most people are familiar with and the one we'll be focusing on — when you don't pay off your full balance owed for purchases made with your credit card and incur an interest charge, that's purchase APR.

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 you see that a credit card has an APR range listed, it means that card has a variable APR. For example, in March 2024, the Chase Freedom Unlimited card had a variable rate of 20.49%-29.24% after the 15-month introductory period. That means your rate would fall within that range, depending on a number of factors.

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 APR ranges, 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 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 to multiple at a 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 just 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 APR rates can be either fixed or variable. If a credit card has a variable rate, that means 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?

If you need to check your APR, it will most likely be available through your issuer's mobile app or online access, on your most recent credit card statement and in your card's terms and conditions.

3. How do I ask for a lower APR?

If you're interested in lowering your APR, call your credit card issuer to make your case. Include positive information about your payment history and why you would benefit from a lower APR.