the federal reserve keeps track of the average interest rate that US consumers pay on a variety of different financial products, including credit cards. In 2021, the average credit card interest rate in the United States for accounts with interest-bearing balances was 16.45%.

Of course, the annual percentage rate (APR) you pay on your own credit cards may not match the national average. Credit card APRs can vary widely based on a number of factors, from your credit score to your debt-to-income ratio and beyond.

Average credit card interest rate by credit rating

Higher credit scores can help you qualify for lower interest rates on credit cards, loans, and other types of financing. As a result, good credit can save you money.

Poor credit scores, on the other hand, indicate a higher risk for the credit card company. This status tends to result in higher APRs for you as the cardholder. It’s not uncommon to come across credit cards with an APR of 25% to 30%.

The exact interest rates on credit cards can vary from one company to another and also between individual cardholders. The type of credit card you open can also play a role in your APR, as premium credit cards often have higher interest rates than other types of credit card products.

Below is a look at the approximate APR range you might find on a general purpose credit card depending on your credit history. You should always check with the relevant credit card issuer to see what rates they offer for each account you are considering.

How your credit card interest rate can affect you

When it comes to interest rates, it’s always best to secure the lowest number possible. On paper, the difference between a 15% APR and a 20% APR doesn’t seem that big. But if you’re revolving a balance on your credit card account, a lower interest rate has the potential to save you thousands of dollars. Below is an example.

As you can see above, your credit card interest rate can also affect how long it takes you to pay off your credit card debt. A lower APR can make debt elimination faster and easier.

Of course, the best way to manage credit cards is to pay off your balance in full every month. If you can develop this habit and avoid credit card debt in the first place, the APR on your account shouldn’t impact your budget. In fact, if you pay off your entire billing balance monthly, you can avoid paying credit card interest altogether.

How to reduce the interest rate on your credit card

If you’re working to pay off credit card debt, securing a lower interest rate could help you save money and get out of debt faster. Here are some strategies you can try to lower your credit card’s APR.

• Compensation transfer: You may be able to open a new credit card to take advantage of a low interest rate or 0% APR balance transfer offer. Low introductory interest rates on balance transfer credit cards don’t last forever (typically 12 to 18 months). But if you can afford to attack your debt aggressively while the introductory APR is in place, you might be able to pull off a large chunk of your credit card debt, or maybe pay it off in full.
  A balance transfer calculator can help you factor in balance transfer fees, introductory rates, and more to total your potential savings. It’s also wise to compare multiple credit card offers for fund transfer to make sure you find the best deal that best suits your situation. Keep in mind that you usually need good to excellent credit to qualify.
• Consolidation loan: Another way to find a lower interest rate on your existing credit card debt is to pay it off with a debt consolidation loan. Depending on your credit rating, debt-to-income ratio (DTI), and other factors, you may be able to get a new personal loan at a lower interest rate than what you’re paying on your credit card accounts.
  A low-interest debt consolidation loan could save you money and escalate the debt elimination process. Also, by consolidating your revolving credit card debt with an installment loan, you can reduce your credit card load while potentially improving your credit score.
• Ask your credit card issuer: Your credit card APR is not set in stone. You can ask your credit card issuer if they’re willing to lower your credit card interest rate, and in some cases you may be successful.
  Let the card issuer know if you’ve seen credit card offers with lower interest rates that you’re considering. A history of timely payments in your account and good credit could also work in your favor when making your request.

Quick tips to improve your credit score

Whether you’re trying to secure a low interest rate on a new credit card account or want to lower the APR on an existing account, good credit can give you an edge. Good credit improves your chances of qualifying for new accounts and getting the best interest rates and terms that credit card companies have to offer.

In truth, going from bad or even fair credit to good credit can take time. But there are steps you can take that could help you see an improvement in your credit score sooner rather than later.

• Check your credit reports. Knowing where you stand is a crucial step when trying to improve your credit score. The good news is that checking your three credit reports from the major credit bureaus (Equifax, TransUnion, and Experian) is easy and free. visit AnnualCreditReport.com Claim a free credit report from any bureau once every 12 months. During the pandemic, you can access your credit reports weekly for free from the same website.
• Write down any disparaging credit information. Once you have your reports in hand, go through them from top to bottom. Write down any negative information you find that could hurt your credit score. There may be nothing you can do about these problems until they eventually disappear from your credit report. But you can point out that you don’t repeat the same mistakes.
• Dispute Credit Errors. As you review your credit reports, you should also list any credit report errors or signs of fraud that you discover. The Fair Credit Reporting Act (FCRA) allows you to dispute any inaccurate information that appears on your credit report with the appropriate credit reporting agency.
• Pay off your credit card balances. Lowering your credit card balance and credit utilization through renewal can be one of the most actionable ways to improve your credit score. Credit utilization is an important factor in creditworthiness, largely responsible for 30% of your FICO score. If you have a low credit utilization rate, it indicates that you have lower credit risk.
• Show positive payment history. How you pay your loan obligations—on time or late—is the most important factor in determining your FICO score. If you avoid late payments, you can set yourself up for success when it comes to your credit score. But even the occasional default on your credit report could potentially be a major setback.
• Consider opening new accounts. If you have a thin credit file or need to build credit for the first time, opening new credit accounts could benefit you. Without a credit history, it can be difficult to qualify for certain loans or credit cards. Some options, such as Things like secured credit cards or home loans might work well for you as long as you always pay on time. You can also think about asking a loved one to add you as an authorized user to an existing credit card account.

bottom line

Improving your credit rating can make it easier to qualify for attractive credit card rates. But don’t be too discouraged if you need to improve your credit score before you can qualify for the best deals available. As long as you pay your billing balance in full each month, you can enjoy the many benefits of a credit card without paying any interest charges – regardless of the current APR on your credit card account.