How to Find and Compare Credit Card Interest Rates

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Understanding How Interest Rates Work

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding credit card interest rates. For more information, see our Editorial Policy.

Understanding How Interest Rates Work

Credit card interest rates are expressed as an annual percentage rate (APR). Unlike installment loans, where the APR includes fees and other charges, credit card APRs are typically the same as the interest rate. Most credit cards offer variable interest rates, which can fluctuate based on market benchmarks. A few cards offer fixed rates, which remain constant as long as the account is open.

Types of Credit Card Interest Rates

Credit cards usually have multiple APRs for different uses:

• Purchase APR: The interest rate on purchases. You can avoid this by paying your balance in full each month.
• Balance Transfer APR: The interest rate on balance transfers, typically the same as the purchase APR but without a grace period.
• Intro APR: Many cards offer a 0% intro APR on purchases or balance transfers for a set period.
• Cash Advance APR: The interest rate on cash advances, usually higher than purchase and balance transfer APRs, with no grace period.
• Penalty APR: The rate applied if you miss a payment by 60 days or more, often the highest rate on a credit card.

Where to Find Credit Card Interest Rates

Federal law requires clear disclosures about interest rates and fees. You can find a card’s purchase and balance transfer APR on the card’s landing page. For detailed information, look for the Schumer box, usually found in the rates and fees section of the card’s page.

What Is a Good Interest Rate for a Credit Card?

A good interest rate is typically below the average rate tracked by the Federal Reserve. For example, in the first quarter of 2023, the average interest rate was 20.09%, up from 14.22% in 2018. Comparing multiple cards can help you find the best rate available.

How to Compare Credit Cards With a Range of Interest Rates

Most credit cards offer a range of interest rates based on risk-based pricing. For example, one card may offer a variable APR from 17.99% to 27.99%, while another offers 18.24% to 26.24%. Comparing the middle rates can help you choose the best option, but consider the overall benefits of each card.

How Does Your Credit Score Affect Your Interest Rate?

Your credit score is a major factor in determining your interest rate. Higher scores generally result in lower rates. However, issuers also consider your income, other debt, and available credit when setting your APR.

How to Get a Low Interest Credit Card

If your priority is a low interest rate, consider the following steps:

• Deprioritize other benefits: Cards with many perks often have higher APRs.
• Improve your credit: Better credit scores can lead to lower rates.
• Consider a credit union: Credit unions often offer lower rates than banks, with a maximum APR of 18%.

Prequalification can help you understand the rates available to you.

Compare All Card Features When Shopping Around

While interest rates are important, consider other features like rewards and benefits. If you pay off your balance in full each month, you may prioritize rewards over APR. Use tools like Experian’s card comparison tool to find the best fit for your needs.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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