The average credit card interest rate across all credit cards was 14.51% as of November 2021, according to the latest data available from the Federal Reserve. However, that doesn’t mean that your credit card interest rate will be the same as the average interest rate for credit cards.
A credit card interest rate, or annual percentage rate (APR), is the amount you pay for credit. Your APR will depend on a number of factors, from your credit score to your credit type, and interest will only apply on any unpaid balance after your billing cycle is over. Read on to learn more about how interest rates for credit cards work, as well as to see how your APR stacks up against the average credit card interest rate.
Related: Average savings by age
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What Is the Average Credit Card Interest Rate?
As noted, the latest average credit card interest rate in the U.S. is 14.51% APR across all credit cards. However, average credit card interest rates differ for accounts that are assessed interest, as opposed to those that have interest charges waived because the statement balance is paid in full.
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Types of Credit Card Interest Rates
Each credit card may have different interest rates for different types of spending. APRs for purchases, balance transfers, penalties, cash advances and introductory offers can vary between different cards — and even when using the same card. If you want more information on average rates and fees, check out average credit card processing fees.
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1. Purchase APR
The purchase APR is the type of credit card interest rate you’re likely most familiar with. This is the APR that applies to purchases made with your credit card when your statement balance is not paid off in full each month.
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2. Balance Transfer APR
A balance transfer APR is the rate that applies to transfer balances from another credit card or loan to your credit card. This can help reduce interest costs so you can pay down debt faster.
Just like purchase APR offers, credit cards will sometimes offer a promotional balance transfer APR to new customers. These promotional rates can be as low as 0% for a certain number of months. After the promotional period ends, a standard balance transfer rate will apply.
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3. Penalty APR
A penalty APR is the rate you will be charged if you don’t make your minimum payments, if you exceed your credit limit or if your bank returns a monthly payment. Not all credit cards charge a penalty rate, but if yours does, it is usually pretty high.
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4. Cash Advance APR
A cash advance APR is the rate you’re charged if you use your credit card to withdraw money from an ATM. Cash advance APRs are usually very high, and cash advance transactions can come with additional fees, Interest starts accruing interest immediately on cash advances.
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5. Introductory APR
Sometimes credit cards will offer a promotional purchase APR to new customers, which is a special interest rate for new purchases made with the credit card within a certain amount of time after opening the card. These purchase APR offers can be as low as 0% APR for some no interest credit cards, and usually last for about 12 months. After the promotional period is over, your standard APR will apply for new purchases.
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Factors That Affect Interest Rate
It is important to know how to calculate credit card interest. There are several factors that can affect your credit card interest rate. These include your credit score, your credit card type and whether you have a travel credit card, a student credit card, a cash-back card or a balance transfer card.
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1. Credit Score
In general, the lower your credit score, the more interest you’ll pay. Consumers with excellent credit (740+) usually pay the lowest effective interest rates, while those with fair or poor credit (580 and below) will pay higher rates. That’s because having a higher credit score means that a consumer represents a lower risk of default to the lender.
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2. Credit Card Type
Interest rates also vary by credit card type. Premium credit cards tend to have higher APRs, as higher interest rates usually come with bigger perks for the card, like cash-back rewards or travel benefits. Credit cards that don’t offer rewards will typically have lower interest rates that reflect the lower cost to the card issuer.
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3. Travel Credit Card
Travel credit cards can have higher APRs than other cards because they offer valuable rewards and benefits like bonus points on hotel and airline purchases or airport lounge access. That is why it only makes sense to go after travel cards if you can afford to pay your credit card bill in full each month and avoid interest charges. If not, the benefits likely will not be worth the interest charges you pay.
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4. Student Credit Card
Some credit card issuers offer cards specifically for students, which can provide students with an opportunity to build credit while they’re in school. These cards are good for young adults who have no credit or a limited credit history. However, they can have high interest rates because they are open to those with a limited credit history.
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5. Cash-Back Card
Cash-back cards allow consumers to earn a percentage cash back on their purchases. These cards tend to have slightly lower interest rates than other rewards credit cards. This may make them more appealing to those who want to earn rewards but may need to carry a balance.
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6. Balance Transfer Card
Balance transfer cards allow you to transfer credit card debt from another card. Some balance transfer cards offer 0% introductory balance transfer APR for several months when you open the card. After the promotional financing period ends, the standard interest rate will apply.
Cards that offer interest free promotional financing for balance transfers can be a great way to avoid interest charges on previous purchases and allow you to pay off your balance sooner. However, most of these credit cards charge a balance transfer fee.
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Compare Credit Card Offers
While the current average credit card interest rate across all cards is 14.51% APR, your APR can vary depending on a number of factors. There are different types of APR for credit cards, and your APR also will depend on your creditworthiness and the card type. Still, knowing what the average credit card interest rate is can help when it comes to choosing a credit card by serving as a benchmark.
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