April has brought a surprising but welcome respite from the volatile fluctuations that we have seen in the last few months since the coronavirus took hold. In response to the global crisis, the average credit card APR continues its decline, falling from 17.35% to 16.14% at the start of the year. Rates rode the seesaw of political indecision in February and March before landing on a steady decrease in April.
The average credit card APR currently stands at its lowest point in two and a half years, but it is still an increase from July 2019’s 17.8% rate. The week of April 13, 2020 showed stability for the first time in weeks, remaining at the same rate due to emergency rate cuts by the Federal Reserve, which cut interest rates by 1.5% and prompted many credit card issuers to do the same.
With unemployment on the rise, more and more Americans are looking to credit cards as a temporary band-aid to weather the storm. Now it’s more important than ever that you find the right credit card APR to maximize its benefits.
What is the credit card interest rate outlook?
There is no doubt that the average APR today is significantly more attractive than six months ago. From low-interest credit cards and cash back rewards to student and business loans, every single type of credit card saw a decrease in its average APR. Low-interest credit cards currently offer the lowest APR, while low credit cards are more than 10% higher.
It’s a positive and hopeful update to this year’s rocky start that establishes an interesting pattern that many Americans can look forward to.
Current Credit Card Interest Rates
As of 08/7/2020
|Type of Card||Average APR||APR Last Week||APR 6 Months Ago|
What are the different types of credit card interest rates?
Credit cards provide many benefits for consumers, including cashback and rewards miles, but can quickly turn costly if you carry over a balance from previous months. That’s why it is so important to understand and compare interest rates.
Before comparing credit card rates, it’s important to understand the types of APRs available to you.
- Fixed APR: A fixed APR is locked in when you apply for your credit card. This can be beneficial if rates go up, but you could find yourself paying much more interest should credit card rates fall. If you prefer the peace of mind of knowing exactly what you will pay in interest, this could be the right fit for you.
- Variable APR: Unlike a fixed rate, variable APRs are usually based on a benchmark rate and fluctuate in response to the market. This could mean higher or lower rates depending on the market, so you will have to monitor your statements closely if you want to know what you are paying in interest each month.
- Purchase APR: A purchase APR is a specific type of APR that pertains to your unpaid credit card purchases. When you roll over a balance each month, the unpaid balance is subject to this interest rate and is added to your total balance. If you don’t plan on paying your balance in full each month, watch out for the extra charge.
- Balance Transfer APR: When you transfer over a balance from a different credit card or loan, it may be subject to a balance transfer APR. Typically, you can get a very low rate for a certain number of months before you move to the regular APR.
- Introductory APR: When you sign up for a new credit card, the credit card company may offer you an introductory APR. This is a temporary offer that will give you a special APR rate for a limited period of time. These introductory rates are normally very low, sometimes even as low as zero.
- Cash Advance APR:You can use your credit card to get cash, but it will cost you. Most credit cards carry a cash advance APR that will apply if you withdraw money from an ATM or bank branch using your credit card.
- Penalty APR: If you miss a payment, your credit card issuer could charge you a fee in the form of a penalty APR. This rate could apply after you miss a due date, and depending on how far behind you fall, you could also suffer additional penalties on your remaining balance or future purchases.
How do I understand and find my credit card APR in the fine print?
We hear credit card companies talk about APRs all the time, but what are they really?
APR stands for annual percentage rate. This refers to your credit card’s interest rate, except that it is expressed in annual form. Your APR can also include the fees that your credit card issuer charges, such as origination fees.
The addition of extra fees makes your APR enormously different from just your credit card’s interest rate, so this is something that deserves close attention when shopping credit card companies.
Finding the APR is not always straightforward. You can look in the fine print of the credit card’s terms and conditions to identify the several types of APRs that a credit card company can charge.
In addition to your credit card’s purchase APR, there are also other APRs like a balance transfer APR, cash advance APR, and penalty APR. Each of these can make one card more expensive than others.
Credit card interest rates and APRs can be largely volatile. However, a credit card can be an enormous help in establishing good credit and offering some extra financial help. Just be sure to read the fine print before you commit.