Credit card interest – something that should be avoided at all costs. Credit cards come with high interest rates, and not paying a credit card bill in full every month can lead to large interest payments and deteriorate your financial health.

In the United States, credit card rates in the are expressed as an APR.

What is a credit card APR? How can you figure out what you can expect to pay on unpaid amounts? And what kind of interest rates are there for credit cards?

Here are the answers to these questions.

What does APR mean?

What exactly does APR mean?

APR stands for “Annual Percentage Rate” and it’s the annual interest a lender charges to a borrower. This percentage represents the yearly cost to finance debt.

For example, if your credit card has a 24% APR, that means you’d have to pay 24% interest on debt you keep on your card for a full year. That said, it’s usually calculated daily and charged monthly.

APR vs. interest rates

A key question that comes up is the difference between an APR and interest rate.

They’re actually the same thing – an APR is an interest rate. The only difference is an APR is an interest rate calculated over a full year.

How credit card APRs work

So how do APRs work when it comes to credit cards? It isn’t all that much different from any other type of loan.

You’ll start paying interest on any amounts you haven’t paid in full when your balance is due, and the interest starts accumulating going back to when the purchases were made, not after your grace period has ended.

So to use an example, if you made a purchase on December 12th and your payment was due on December 31st, you would be charged interest calculated starting on December 12th – the date of the initial payment – even though it was only due on the 31st.

However, almost all credit card APRs in the U.S. have varying rates. There are 2 variables at play.

The first is that rates vary based on the prime rate as published by the Wall Street Journal. The credit card companies’ rates will change when the prime rate does (you can view the current rate here).

The other is based on your credit score. Most credit cards have a varying range of interest rates, and the actual rate you pay will vary on your trustworthiness. Meaning, the better your credit score, the lower your rates will be.

The typical range for credit cards on purchases and balance transfers is between 14% to 25%.

APR Calculator

So how can you calculate what you would owe based on your APR?

The first step is to divide your APR by 365 (or 366 if it’s a leap year).

Then, you take the amount you owed, and multiply it by the number of days the debt is outstanding

Here’s the APR formula to use:

Interest paid = (APR/365 x (amount owed) x (days since the purchase))/100

Here’s a couple of examples of the total interest paid, on varying amounts and different lengths of time.

Amount borrowed APR Days Since Purchase Total Interest Paid
$1,000 20% 30 $16.44
$2,000 15% 45 $36.98
$3,000 25% 60 $123.29
$4,000 10% 20 $21.92

And because graphs make everything better, here is the visual representation of these numbers.

Interest rate calculator examples

How much could you save with a low interest credit card? Our APR calculator can help you out:

Credit Card Interest Calculator

5 different types of credit card APRs

There are 5 different types of credit card APRs. Here’s an overview of each one.

One thing to note – not every credit card has all 5 types, so it’s best to verify the details for your specific credit card.

1. Purchase APR

The most common type of credit card APR is the purchase APR.

This is the rate that is used towards your purchases that aren’t paid in full when your statement is due.

Interest is never charged on purchases right away – the typical grace period for credit cards is 21 days. But if you don’t make your payment on time, interest gets calculated on your purchases on the date your purchases were made, not when the grace period ends.

2. Cash advance APR

The cash advance APR is used when you go to an ATM or bank and use your credit card to get cash from a machine or teller.

There is no grace period for cash advances – the interest starts to accumulate right away. There’s also a fee to pay on top of the cash advance as well – typically 5% of the amount withdrawn.

To top it off, most credit cards don’t have variable rates for cash advances – there’s only one rate everyone gets (but it still varies with prime).

3. Balance transfer APR

A balance transfer is when you transfer the balance from one credit card to another. And this transfer has its own APR. It also has a fee of around 5% of the amount being transferred.

The key reason to complete one of these transfers is to save on interest – by transferring your credit card balance from a card with a higher interest rate to one that is lower.

4. Promotional APR rates

Many credit cards come with introductory promotional APRs on balance transfers and/or purchases.

These rates are much lower for a specified number of months, depending on the credit card. These rates can really help save on interest if you have some big purchases coming up, or if you have existing debt on other credit cards you need to get a handle on.

5. 0% APR credit cards

While no credit cards have permanent low interest rates of 0%, many credit cards have promotional rates of 0% on balance transfers and/or purchases. Many have them for a length of 12 months or longer.

A 0% rate is an extremely helpful way to get a handle on credit card debt.

Best credit cards for low APR

So what low APR credit cards are there?

Unfortunately, right now there are no credit cards that have permanent low interest rates that don’t vary based on your creditworthiness.

There are however, plenty of credit cards that have promotional rates. Here are some of the best offers right now, that have a 0% promotional APR on both balance transfers and purchases.

Credit Card Permanent Interest Rates Promotional Offer Rewards Annual Fee
* Purchases: 13.99% – 23.99%
* Cash Advances: 27.24%
* Balance Transfers: 13.99% – 23.99%
0% for 12 months on purchases and balance transfers * 3% cash back on a category of your choice
* 2% cash back on groceries
* 1% cash back on all other purchases
* Purchases: 14.99% – 24.99%
* Cash Advances: 23.99% – 25.99%
* Balance Transfers: 14.99% – 24.99%
0% for 12 months on purchases and balance transfers * 3 points per $1 spent on gas, rideshares, transit, travel, and streaming services
* 1 point per $1 spent on all other purchases
* Purchases: 11.99% – 22.99%
* Cash Advances: 24.99%
* Balance Transfers: 11.99% – 22.99%
0% for 14 months on purchases and balance transfers * 5% cash back on rotating categories
* 1% cash back on all other purchases
* Purchases: 14.99% – 23.99%
* Cash Advances: 25.99%
* Balance Transfers: 14.99% – 23.99%
0% for 12 months on purchases and balance transfers * 4 points per $1 spent on takeout, food delivery, and dining
* 2 points per $1 spent at grocery stores, grocery delivery, streaming services, and gas stations
* 1 points per $1 spent on all other eligible purchases

* All interest rates current as of January 13, 2021.

How do these 0 APR credit cards compare? Here’s the breakdown in a few different areas.

Annual fee comparison

First, the annual fees. And in this department, each one of these credit cards won’t charge you an annual fee to not only get these promotional rates but also rewards on your purchases.

It’s a little extra savings with these credit cards.

Comparison of low APR promotional offers

When it comes to the low APR promotional rates, here is the duration of the purchase and balance transfer promotion (all the rates are 0%).

Comparing Low Promotional APR Rates of 4 Credit Cards

3 of these credit cards will give you a whole year of 0% interest on balance transfers and purchases, with the Discover it Cash Back providing 14 months of 0% interest.

Permanent rate comparison

What about the permanent APRs for these credit cards?

Here’s the lowest possible interest rate you could get for all 3 credit cards:

Comparing Interest Rates of 4 Credit Cards

The Discover it Cash Back has an edge here, having a permanent rate that is 2% lower than the rest on purchases and balance transfers.

However, all the purchase and balance transfer rates are variable, so just because one offers lower rates, doesn’t mean that’s what you’ll get. One of the other credit cards could still get you lower permanent rates, based on how they determine your creditworthiness.

Earning rewards on low APR credit cards?

And of course, while you’re saving on interest payments, you can also earn rewards on the side.

Based on a typical $2,000 monthly spend, here’s the average earn rate for these 3 credit cards.

Comparing Credit Cards Average Rate of Return

These credit cards are close when it comes to annual rewards, with the U.S. Bank Altitude Go Visa Signature having a slight edge.

Want to see more 0 APR credit cards? Here’s other credit cards to consider:

Zero Percent APR Credit Cards

The bottom line

Having a basic understanding of how credit card APRs work can help determine how much interest you may end up paying with a credit card.

Taking advantage of promotional rates is a great way to help save on credit card debt, giving you some temporary relief to help get your finances in order.

Have you taken advantage of credit card promotional interest rates? What was your experience?

Let us know in the comments below.


What is a credit card APR?

A credit card APR (annual percentage rate) is the interest rate charged by a credit card over one year on unpaid amounts.

What are the different types of credit card interest rates?

There are 5 main types of credit card interest rates:

  • new purchases,
  • cash advances,
  • balance transfers,
  • promotional rates, and
  • 0% APR promo rates.

What is a good APR for a credit card?

A good APR for a credit card in the U.S. would start at 12% on the lower end, but almost all credit cards have variable rates that can climb as high as 24%, depending on your creditworthiness.

Do all credit cards have APR?

Not quite. American Express charge cards do not have regular interest rates. These credit cards require balances to be paid in full every month. Any outstanding amounts are charged at an exceptionally high interest rate of 30%.