Credit cards can be a useful tool in your personal finance arsenal. These cards can help you build credit, cover costs in an emergency situation, or just earn you points toward travel and cash back.
While credit cards can be important to build your credit history, it’s essential that you charge any purchases mindfully. Because if you don’t pay off your credit statement at the end of each month, your balance will accrue interest. And unless you have a 0% intro APR or other special-rate card, these fees can add up fast: The average credit card interest rate was 16.27% in August 2022, the most recent figure provided, according to the U.S. Federal Reserve.
Whether you’re in the market for your first credit card or are pursuing the latest rewards credit cards, here’s an overview of what the current landscape looks like.
What Is the Average Interest Rate for a Credit Card?
The average interest rate on a credit card is typically somewhere between 10% and 30%. Depending on the category of the card and your creditworthiness, you’ll traditionally pay more or less interest.
Credit card interest rates can fluctuate, and rates are currently on the rise: The average credit card interest rate has increased over a six-month period in 2022, from 16.17% to 16.65%, according to CNN. Credit card balances — and debt loads — have also grown.
The Consumer Financial Protection Bureau (CFPB) reviews the consumer credit card market — practices of credit card issuers, consumer debt levels, etc. — every two years. In the 2021 Consumer Credit Card Market Report, authors reported on credit scores and the average interest rates and reported the following.
Credit Scores and Interest Rates
|Credit Score||Approximate Average Interest Rate|
|Superprime (720 and higher)||17%|
Going deeper, here’s information on credit card rates by card type in the United States, according to Statista in a 2019 survey.
Credit Card Interest Rate Comparison
|Type of Credit Card||Average Interest Rate|
|Secured credit card*||24.99%*|
|Student credit card||17.79%|
|Business credit card||15.24%|
|Instant approval credit card||20.06%|
|Airline credit card||17.50%|
|Rewards credit card||17.46%|
|Low interest credit card||14.61%|
|Balance transfer credit card||16.77%|
*This rate was pulled from a CNBC article in 2022.
APR stands for annual percentage rate, the yearly interest of a credit card charged to the borrower. And as you can see in the tables, credit card APR can vary quite a bit — the average credit card APR will look different for each card and each applicant.
Both the card type and a person’a creditworthiness can influence interest rates on a credit card. For example, a secured credit card — one that a consumer uses to help build their payment history or credit to raise their credit score — usually carries a higher interest rate. Whereas a person with a high credit score and solid payment history would likely be approved for a rewards credit card with a lower (yet variable) APR.
Ultimately, the average credit card interest rate will vary depending on several factors. With that said, there are ways you can reduce interest rates on your credit card.
How to Reduce Your Interest Rate on a Credit Card
There are multiple ways for you to reduce the interest rate on your credit card. Here’s how you can trim your rate, either by sticking with your current card or through other methods.
- Do a balance transfer. If you have a balance on a credit card with a high interest rate, you might be able to transfer your balance onto another credit card. Balance transfer credit cards usually charge varying rates (typically, a set price or a percentage of the balance amount you want to transfer), and some cards offer special rates like 0% intro APR for balances transferred within the first 60 days of you opening an account, for example. There are many balance transfer cards out there, but you typically need a Good or better credit score to qualify for one.
- Take advantage of intro offers on credit cards. Jumping off that last point, there are tons of cards that offer special offers for new cardholders. You could look for a credit card with a 0% introductory APR or pursue one that offers a no-interest-generating balance transfer for 12+ months so you can pay off an existing amount over time.
- Apply for a consolidation loan. A debt consolidation loan offers a path of relief for people struggling to manage credit card or other high-interest debt loads. Debt consolidation or personal loans are avenues to explore for generally better APR and loan terms if you find yourself unable to pay down your credit card debt under current circumstances.
You can also call your credit card issuer and see if you can negotiate a more favorable interest rate or raise your credit limit. Your mileage will vary, but If you’re a longtime client and have made regular, on-time payments, you have some leverage.
Finally, you can pay off your balance on your card each month to avoid accruing interest charges to your account altogether. If you’re in a position to do so, that’s your best-case scenario. (And that way you won’t need to factor in credit card APR so highly in your decision when choosing among different cards.)
How to Improve Your Credit Score
If you have a less-than-stellar credit history, you can take action to improve your creditworthiness. It won’t be an overnight fix, but with diligence, consistency and good habits, you can raise your credit score steadily over a period of time.
Here are five ways to improve your credit score:
- Pay your bills on time. Missed and late payments can dent your credit score and cause all sorts of issues for your finances. Create a budget and set regular bill payments to autopay. And again, do your best to pay off your credit card bill fully at the end of each statement cycle to avoid paying interest on your credit card purchases.
- Check your credit score regularly. A service like Credit Karma is free to use and can keep you up-to-date on your credit history. You can also access your reports for free at AnnualCreditReport.com. Many banks and credit card companies (where you’re a customer) will provide you with your credit score, too.
- Prioritize paying down high-interest debt. Credit card interest, loan interest — it all adds up. Review the amounts, conditions and terms for all your interest-bearing debt and make a plan to pay it down. Make extra payments toward your debt when you can, too, to avoid paying more interest over time.
- Keep your old accounts open. A long credit history contributes to your overall credit score, so it’s likely in your best interest to leave your credit card accounts open (though you’ll want to assess your options if a particular card has a high annual fee, for example). You can assign certain cards to regular bill payments to keep your cards both open and active.
- Mindfully apply for credit. Building credit is important, but it’s essential that you do so the right way. For example, store credit cards usually have a high APR and you can only use them at a particular retailer, whereas cash back credit cards might not have as high of an APR, can be used anywhere they’re accepted and can net you regular rewards. Be selective when opening new credit card accounts and applying for any loans. Don’t take on credit card debt willy nilly in the name of building credit, especially if you don’t have a debt-payoff plan.
It’s especially helpful to raise your credit score ahead of a big purchase. If you’re looking to buy a house in a year and a half, for instance, you’ll want to work on shaping up your credit now to improve your chances of qualifying for a mortgage at a good rate later.
Credit card interest rates may be rising, but don’t let that deter you from applying for a card — as long as you’ve done your research and are responsible with it. And keep in mind that credit card accounts are not one-size-fits-all; it’s important that you review credit card APR, but also the other fees and potential rewards that are available with it.
Contributor Kathleen Garvin (@itskgarvin) is a personal finance writer based in St. Petersburg, Florida, and former editor and marketer at The Penny Hoarder. She owns a content-writing business and her work has appeared in U.S. News, Clark.com and Well Kept Wallet.