Variable Interest Rates
You can use the prime interest rate to help you determine whether you have a good credit card APR. If you have a variable rate credit card, its APR will be linked to the prime interest rate. According to Creditcards.com, prime is set at three points above the Federal Reserve rate, and variable rate credit cards typically add a certain number of points on top of that number. If the Federal Reserve rate is low, a variable rate credit card should have a good APR. According to Business Week, a low rate is typically below one percent. If the Federal Reserve rate goes above one percent, you might be better off transferring your balance to a card with a fixed APR.
Introductory Interest Rates
Many credit cards offer special introductory interest rates of zero to one percent for up to a year. If you can get a low introductory rate that lasts for 12 months, it's a good deal. Pay attention to the new APR that will take effect after the promotional period. If it is more than 13 percent, ask the card issuer to lower it or be prepared to transfer the balance to a different card with a better APR.
Rates for Good Credit
If you have a good credit score, you should be able to qualify for the best credit card APRs. You may be able to get a single-digit credit rate between seven and nine percent, although Bankrate's credit card search indicates that you will most likely get an APR between 11 and 13 percent. This amount will vary depending on current economic conditions. If you want to figure out a good APR, use a search site like Bankrate that lets you easily see the cards with the lowest rates.
Rates for Bad Credit
When you have bad credit, you may have difficulty getting any credit cards. If you are able to open an account, you will probably be expected to pay a very high APR. This can run from 20 percent all the way up to 40 percent, depending on your exact credit score and the card issuer. These rates are often considered to be predatory because they take advantage of consumers who have had credit problems. High-APR credit cards also tend to have high fees for making a late payment or going over the credit limit. You should avoid these cards whenever possible. Secured credit cards are a better alternative. They have lower interest rates because you secure the line of credit by making a deposit into a bank account. This eliminates the lender's risk, so your interest rate should be below 15 percent.
Reward cards usually have competitive APRs. However, a good APR for a reward card may be slightly higher than for other cards because the benefits offset the additional interest. Typical reward programs include airline miles, hotel points, reward points that can be redeemed for gift certification, and even cash back. These cards work best for people who charge as many purchases as possible and pay off the balance in full each month. That maximizes the rewards and makes the APR irrelevant.