Credit cards offer several advantages over traditional debit cards. The biggest perk is that it boosts your spending power. With a credit card, you can break expensive purchases down into smaller, more manageable payments.

Using a credit card can come at a cost, though, especially if you carry a balance.

Your credit card’s annual percentage rate, or APR, is the interest rate you can expect to pay on any balance you carry from month to month. A high interest rate means that you can expect to pay more in interest each month and over time as your balance grows.

Your credit card APR isn’t always a fixed rate, and there are moves you can make to lower it and save money in the long run.

How your APR impacts your credit card debt

If you carry a credit card balance from month to month, it pays to try to work with your issuer to secure a lower interest rate. The lower your APR, the less you’ll accumulate in interest charges over time, and the faster you can expect to wipe out your balance.

Say you owe $5,000 on your credit card and your APR is 25.99%, a bit more than the national average. If you set a goal to pay off your balance in one year, your monthly payment would come out to around $478 per month. At the end of that 12-month period, you will have paid $731.52 in interest.

But, say your credit card issuer is willing to reduce your APR to 24%. This new APR would lower your monthly payment to $473 and over the course of that year, you’d pay $673.58 in interest.

Factors that can influence your credit card APR

Credit card APRs are sensitive to various different factors. Changes in economic policy can make issuers raise or lower credit card rates. On a more personal level, your credit habits and history can also impact the APR you’re given.

Some of the most common factors that influence your credit include:

The Fed

The Federal Reserve doesn’t set credit card APRs. But, it can affect them through changes in the federal funds rate — the short-term interest rate banks use to borrow from each other.

When inflation is high, the Fed might raise rates to help the economy run smoothly again. Boosting this rate makes it more expensive for consumers to borrow money and encourages them to save.

Changes in this rate can influence banks’ decisions to raise or lower rates attached to credit cards, mortgages, personal loans, and more. The higher the federal funds rate, the more consumers can expect to pay in interest on any balances they carry.

According to data from the Federal Reserve, the average credit card APR stood at 20.68% in May of 2023 — up from 15.13% during the same period in 2022 and 14.71% in 2020.

Your credit health and habits

Your credit history is an indicator of how likely you are to pay off your credit card balance in full and by the due date each month. Lenders use it as a gauge when setting your APR. Generally, a good credit history will result in a more favorable APR.

On the opposite end of the spectrum, a history of missed payments could make your lender uneasy, and, if you’re approved, it could mean being subjected to a higher APR.

The end of your introductory period

Certain credit cards, like balance transfer cards, may come with generous card offers to draw in cardholders. This may include a waived annual fee or a temporary low or zero percent interest period.

If your new card comes with a promotional APR, your APR will increase once that intro period ends. Be sure to note when your promo period ends so you can make a plan to pay off your balance before interest starts to accrue.

Where to find your APR

Your credit card agreement and monthly statement will contain key information about your APR. Credit card issuers must include a Schumer box within their credit card terms and conditions by law. A Schumer box is a table that will outline your card’s APR, as well as other key rates and fees. Other APR types you can expect to see in that disclosure include:

Introductory APR

Many credit cards offer a low or, in most cases, zero-interest period for a short time after you’re approved. For example, the Chase Freedom Unlimited® credit cardboasts an 15-month, interest-free balance transfer period, and then a 20.49%–29.24% variable APR.

Balance transfer APR

A balance transfer is when a consumer decides to move their credit card balance from one card to another, usually to benefit from a lower APR. This new APR is your balance transfer APR.

Cash advance APR

Credit card issuers usually charge higher interest rates for cash advances — that's when you borrow against your credit limit by making a cash withdrawal.

Penalty APR

A penalty APR is the interest rate that your credit card issuer will apply to your balance if you fail to meet the terms of your credit card agreement, like a late or missed payment. Your credit card company must notify you at least 45 days before an interest rate increase.

Can you ask your credit card company for a lower interest rate?

The easiest way to lower your credit card APR is to simply ask your credit card company. Oftentimes, issuers are willing to work with cardholders who have a good track record and a history of on-time payments.

If you’re struggling to make payments, giving your issuer a call and having an honest conversation with them might make them more willing to adjust your APR, even if only for a short time to make repayment more manageable.

If your credit card issuer won’t lower your interest rate

If your issuer isn’t willing to lower your APR now, it doesn’t mean they won’t lower it in the future. But, there are moves you can make today to secure a lower APR in the future, improve your credit score, and start chipping away at your debt balances in the meantime.

Consider balance transfer card options

If the goal of lowering your APR is to pay off your balance faster, a balance transfer credit card could help you do that. This type of credit card does charge a balance transfer fee, but many balance transfer cards offer a lower APR. This could help you reduce your balance and save money on interest over time.

The Discover it® Balance Transfer, for example, offers a 0% intro APR for 15 months on balance transfers and purchases, and then 17.24%-28.24% APR applies. The Citi® Double Cash Card is currently offering cardholders a 0% intro APR for 18 months on balance transfers. After that, the variable APR will be 19.24%-29.24%, based on your creditworthiness.

Make a plan to repay existing debt balances

Set a timeline for yourself and make it a goal to make on-time payments each month. If you can afford to make more than the minimum payment, it could be worthwhile to do so — that way, you can wipe out your balance a lot faster. This can also help boost your credit score by lowering your credit card utilization ratio. Having more credit available, compared to your debt balance, can earn your brownie points with the credit bureaus and raise your credit score.

Keep a close eye on your score

You can track your progress by checking your credit score on your credit card statements, or some credit card companies may even provide you with a credit score via their mobile app. You can also pay to view your score from one of the three major credit reporting agencies — Equifax, Experian, or TransUnion.

Keep the lines of communication open

In a few months, follow up with your credit card issuer and come prepared with the most recent copy of your credit report and your credit score. If your score has improved, your issuer might be willing to work with you and offer a more favorable APR.

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