What Is APR?

Even for those who pay off their credit card balances every month, knowing your APR is part of keeping good credit habits.

woman sitting on bed, with laptop and phone and credit card in hand
(Image credit: Getty Images)

Swiping your credit card is easy. But if you carry a balance, paying it off could be a challenge. Especially if you don't know your credit card's annual percentage rate (APR). And shockingly, a lot of people don't. In a December 2021 Bankrate study, 41% of cardholders carrying a balance didn’t know their credit card APR. And with the Federal Reserve raising interest rates (opens in new tab), knowing your APR is important now more than ever.

What is an APR?

Your credit card APR, or your interest rate, is how much extra money you'll pay on any balance you don't pay off in full at the end of each billing cycle. This rate is typically stated as a yearly rate, and it may be a fixed rate or a variable rate. Currently, the average APR for new credit cards is 21.59%. If you don't know your APR, you can find it in your credit card's terms and conditions.

Most credit cards operate on a variable rate, meaning the rate can change, often rising or falling in tandem with interest rates set by the Federal Reserve. When the Federal Reserve Board raises short-term interest rates, those increases affect interest rates on credit cards as well most other lending and savings products such as savings accounts, mortgages, home equity lines of credit and other loans.

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How Does this Affect Me?

If you’re carrying a balance on a high-interest-rate card, plan to pay it off as soon as possible, without adding any new purchases. If you receive a tax refund (opens in new tab)—and most taxpayers do—use that money to pay down debt. Even if the refund doesn’t pay off the balance in full, the reduced total will trim the amount of interest assessed. Or you may want to pick up a side-hustle (opens in new tab), using the extra money to pay off your balance.

Another option is to apply for a balance-transfer card. Recently, cards from Wells Fargo, Capital One, Bank of America and others allowed balance transfers with an introductory rate of 0% for five to 18 months. You can also check to see if any current cards in your wallet are offering balance-transfer promotions.

Chase, for example, recently offered current Freedom Unlimited cardholders a 0% promotional rate for transfers made by September 30. The 0% rate lasts through the October 2023 billing cycle, with a transfer fee of 4% of your balance. And you can’t transfer a balance from one Chase-issued credit card to another; the transfer must be from another financial institution or retail card.

Keep in mind that with any balance transfer, if you don’t pay your balance by the time the promotion ends, any balance left over is generally subject to your card’s normal interest rate. And read the fine print—your balance could be subject to retroactive interest charges.

Rivan V. Stinson
Staff Writer, Kiplinger's Personal Finance

Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. She's now a staff writer for the magazine and helps produce content for Kiplinger.com. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher.