If you’re new to the world of credit cards, understanding the ins and outs can be confusing. One of the most important factors to consider is the annual percentage rate (APR). But what is a good APR for a credit card, and how does it affect you? Don’t worry; we’re here to help explain it all in layman’s terms.
What is APR?
APR stands for annual percentage rate. The APR is the total cost of credit in a year—including interest. Essentially, it’s the cost of borrowing money from the credit card company. Your APR can vary based on your credit score, the type of credit card, and the current market rates.
What Does APR Mean for Credit Cards?
A higher APR means you’ll pay more in interest charges on your balance every year. So, if you carry a balance on your credit card, a high APR can cost you a lot of money over time. On the other hand, a lower APR can save you money in interest charges. If you carry a balance of $1000 on a credit card with a 10% APR and make no payments for a year, you’ll end up owing $1100 at the end of the year. The $100 difference represents the interest charged on your balance, which is 10% of the original $1000. Of course, it’s always best to pay off your credit card balance as soon as possible to avoid paying unnecessary interest charges.
What is a Good APR for a Credit Card?
A good APR for a credit card depends on your individual situation. Generally, a good APR is below 15%. However, if you have a low credit score, you may have to settle for a higher APR. The average in the US is currently 24.16%, according Forbes.
Building Credit with Brigit’s Credit Builder*
If you’re looking to improve your credit, consider using Brigit’s Credit Builder. Brigit reports your on-time payments to the credit bureaus, helping you build credit over time (learn about how your credit score is calculated here). The subscription includes access to credit monitoring, credit score tracking, and identity theft protection. By using Brigit’s Credit Builder, you can improve your credit and potentially qualify for a credit card with a better APR in the future.
*Impact to score may vary. Some users’ scores may not improve. Results will depend on many factors, including on-time payment history, the status of non-Brigit accounts, and financial history. Results show that customers with a starting credit score of 600 or below were more likely to see positive score change results.
Banking services provided by Coastal Community Bank, Member FDIC.