One of the most important things to think about when getting a credit card is the APR, or annual percentage rate. If you carry a balance from month to month, the APR tells you how much interest you’ll have to pay. So, is 26.99 percent a good APR for a credit card? Let’s find out.
What is APR?
APR stands for annual percentage rate. It’s the interest rate you pay annually for borrowing money on a credit card or loan. The APR is expressed as a percentage value.
When it comes to credit cards, the APR is charged on any amounts you don’t pay off by the due date every month. The credit card company adds interest to your account every day on the amount you still owe. The interest keeps adding up until you pay off the full balance.
How Credit Card APRs Work
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APRs on credit cards are usually variable, which means they can rise or fall over time. One rate, like the prime rate, is used to figure out the APR. When the index rate changes, your APR will also change.
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Many cards have tiered APRs based on your creditworthiness. People with excellent credit get lower APRs, while those with poor credit get higher APRs.
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Introductory APR offers are common. You may get 0% for 12-18 months on purchases and/or balance transfers. But after the intro period, the regular APR kicks in.
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The average credit card APR is currently around 16% for people with good credit. But rates can vary widely from around 12% up to 36% for applicants with poor credit.
Is 26.99% a Good APR?
A 26.99% APR is quite high compared to average credit card rates. Cards with APRs in this range are often targeted at consumers with poor credit. Here are a few key points on whether it’s a good APR:
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Payment in Full Every Month: You can avoid interest charges if you pay off your loan in full every month. So the APR may not be a big factor. Focus instead on other features like rewards.
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Carrying a Balance: If you tend to carry a balance, an APR around 27% will make that balance expensive. Interest charges add up quickly. Paying off the balance ASAP should be a top priority.
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Available Options: Applicants with poor credit don’t have abundant options. But some secured cards have APRs in the 20% range, which is preferable if you qualify. Building credit could open up better choices down the road.
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Introductory Offers: A 0% intro APR on purchases or balance transfers can provide significant short-term savings. Just be sure you have a payoff plan before the regular APR kicks in.
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Your Credit Profile: The APR generally reflects your creditworthiness. Improving your credit could lead to lower rates over time.
What is a Good Credit Card APR?
A “good” APR depends largely on your credit score and history. Here are some guidelines:
- Excellent credit (scores above 720): 12% – 22%
- Good credit (680-719): 15% – 25%
- Fair credit (620-679): 18% – 26%
- Poor credit (below 620): 20% – 36%
The best APRs go to consumers with exceptional credit. But even people with fair credit can sometimes get rates under 20%. Here are a few tips for getting a good APR:
- Maintain a long credit history with on-time payments
- Keep credit card balances low compared to limits
- Limit new credit card applications and hard inquiries
- Have a variety of credit types (credit cards, loans, etc.)
- Avoid late payments, collections, and public records
Alternatives to High-APR Credit Cards
If you don’t qualify for prime credit card rates, here are a few options to consider:
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Secured credit cards – These require a security deposit, but help establish or rebuild credit. The deposit is usually equal to the credit limit.
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Credit builder loans – These report monthly payments to the credit bureaus. On-time payments help build positive credit history.
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Student credit cards – These are made for students with little or no credit history. They tend to have lower rates and limits.
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Become an authorized user – You can piggyback on someone else’s account to benefit from their credit history and potentially get better rates.
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Credit counseling – Non-profit counselors can help you through financial hardship, negotiate with creditors, and start rebuilding credit.
The Impact of APR on Credit Card Costs
Let’s look at a few examples to see how APR impacts interest charges on credit card balances:
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With a 26.99% APR, a $1,000 balance would incur $223 in interest charges over one year.
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At an 18% APR, that same $1,000 balance would cost $180 in interest over one year.
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Dropping the APR further to 12% would lower the interest to $120 per year on the $1,000 balance.
As you can see, the APR makes a big difference in how much credit card debt ends up costing you. The lower you can keep the rate, the more money you’ll save on interest charges.
Tips for Minimizing APR Costs
Here are some strategies to reduce APR costs if you carry a credit card balance:
- Make at least the minimum payment every month on time
- Pay more than the minimum when possible to pay debt faster
- Look for lower APR balance transfer offers to save on interest
- Consolidate multiple balances to simplify payoff
- Contact issuer to request a hardship APR reduction
- Set up automatic payments to avoid missed payments
- Pay down balances with tax refunds, bonuses, or other funds
- Avoid new purchases until existing balances are paid
- Consider debt management or credit counseling services
The less you owe at a high APR, the less interest you pay. So put extra funds toward reducing balances, and avoid new purchases until you pay off existing balances. The savings can really add up.
The Bottom Line
While 26.99% isn’t an ideal APR on a credit card, it may be one of your options depending on your credit situation. Weigh it carefully against your alternatives. If you do get a card with a high rate, be diligent about paying off your balance each month. If you carry a balance, have a payoff plan to minimize costly interest charges. Improving your credit profile can potentially lead to a lower APR over time.
How to evaluate credit card APRs
As of November 2023, the average APR charged for credit card accounts that incurred interest was 22.75%, according to the Federal Reserve. For all accounts, the average was 21.47%. If your APR is below the average, you can probably consider it good.
But not all credit cards are created equal, and some will be more expensive to carry a balance on than others. For example, a rewards credit card with benefits and perks is likely to have a higher APR — or an APR range that reaches higher — than a bare-bones card.
And different transactions — purchases, balance transfers and cash advances — may have different APRs on the same card. There’s even sometimes a penalty APR for late payments. These rates are spelled out in the credit cards terms and conditions, so be sure to review them.
If a low APR on purchases is your priority, consider researching options from credit unions, where interest rates on credit cards tend to be lower than at major banks.
What to expect from credit cards with low APRs
Depending on the issuer, low-interest credit cards usually require a good credit score — 690 or higher — to qualify.
These cards may lack some of the bells and whistles of rewards credit cards, but they can save you money on interest if your account has a balance each month — such as from financing a large purchase or transferring an existing high-interest balance to the card.
Cards with a 0% introductory APR offer are ideal for paying down transferred debt or financing a large purchase interest-free. The Wells Fargo Reflect® Card, for example, offers a lengthy 0% intro APR period: 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers, and then the ongoing APR of 17.24%, 23.74%, or 28.99% Variable APR.
If youre the sort of person who regularly carries a balance from month, to month, youd be better served by a card with a low ongoing rate. If your credit is good, you can find ongoing APRs under 10%, usually from credit unions. Even some secured cards for people with bad credit offer a low APR, though youll usually have to pay an annual fee to access it. See our rundown of cards with low ongoing APRs.
Understanding APR and Interest Rates: Key Differences Explained. #APR #INTERESTRATES
FAQ
Is a 26 APR good or bad?
Generally, an APR below 21% is relatively low. Anything over 24% is more expensive. If you pay off your credit card balance in full every month, the APR won’t be as important as you won’t be paying interest. But if you forget and the APR is high, the interest charges will quickly rack up.
Is a 26 percent interest rate high?
Yes, a 26 percent interest rate is generally considered high. For credit cards, it’s above the average and can lead to significant interest charges if you carry a balance.
What does 26 percent APR mean?
Monthly interest rate (APR) is the amount of money you’ll pay each month if you have a credit card balance.
How much is 26.99 APR on $3000?
A 26. 99% APR on a $3,000 balance would result in $67. 26 in monthly interest charges. This calculation assumes the interest is calculated on a monthly basis.