Credit Card APRs
Annual Percentage Rate, or APR, essentially represents the annual total cost of borrowing. APR is not the exact same thing as interest rate, as APR includes the interest rate, along with any and all additional fees associated with borrowing.
Though they lack mortgage origination fees and other fees including closing costs associated with a home mortgage APR, credit cards will often include annual fees, late fees and other fees that can factor into Credit Card APR. Credit Card APRs are based entirely on a borrower’s creditworthiness, as indicated by the individual’s FICO credit score.
The stronger the FICO score, the lower the APR. When it comes to credit card APRs, there are several varieties including Purchase APR, Balance Transfer APR, Penalty APR and Cash Advance APR. Credit Card APRs vary significantly among these categories, and that’s before taking into account different credit card types and issuers.
Credit Card Interest Rate
Credit Card APR impacts the balance remaining on a credit card and the manner in which payment is allocated between principal and interest. The math beneath credit card APR can be a bit confusing, since APR is an annualized term, yet most credit cards calculate interest expense on a daily basis.
Many credit card companies employ various APR rates to different forms of credit. For example, as the names imply, Purchase APR applies to credit card purchases and Balance Transfer APR applies to balance transfers moved onto the card.
Penalty APR is applied to credit card accounts that become delinquent by sixty days or more, and is often as high as 29.9% – the maximum interest rate that banks are permitted to charge. Cash Advance APR gets applied to cash advances, and though usually not as high as 29.9%, it is often much higher than either Purchase APR or Balance Transfer APR.
How To Calculate Monthly Interest Expense Using Different APRs
For a given credit card, there may be multiple APRs (as described above) that accumulate varying amounts of interest expense within a specific billing cycle.
Let’s use an example of a credit card with a $10,000 balance that is split as follows: $5,000 is at the Purchase APR of 15%, $3,000 is at the Balance Transfer APR of 6%, and $2,000 is at the Cash Advance APR of 22%. In order to calculate interest expense for a billing cycle (we’ll use 30 days), the calculation goes as follows: Take the balance, multiply by the (APR/365 days) and multiply by the number of days in the billing cycle. Therefore –
Today's Credit Card APRs vs. Historical Credit Card APRs
In order to make the comparison between current credit card APRs and credit card APRs from previous years, it’s important to first recognize that there is no such thing as an “average credit card APR,” as they will vary by card type and issuer. There are, however, ranges and averages by type, as this chart from valuepenguin.com illustrates: (Note that these are Purchase APRs)
With credit card interest rates playing such a predominant role in credit card APR, an historical overview of credit card interest rates can serve as a basis for comparing historical credit card APRs.
Changes in credit card interest rates reflect changes in the overall economic environment and can help consumers decide whether they are getting a fair deal based on current values and historical trends.
Historical Credit Card APRs
The chart dates back to mid-2007 and is updated on a weekly basis. (Hover over any point on the chart to reveal data for a given time frame.)
This chart includes data on a variety of credit card types – including Airline, Balance Transfer, Business, Cash Back, Instant Approval, Low Interest Rate, Student, and Rewards Cards.
The chart reveals that during the time leading up to and including the financial crisis and its aftermath – ranging from late 2007 until late 2008 – credit card APRs dropped markedly before beginning a steady rise from late 2008 until March 2010.
The chart further reveals that for the period between March 2010 through December 2016, most credit card APRs remained relatively stable. However, beginning in January 2017 and stretching to the present time frame of March 2019, Credit Card APRs have risen steadily, with the National Average coming in at 17.6%.
This is significantly higher than the National Average low of 11.11% during April 2008 and the National Average Credit Card APR that remained relatively stable in the mid-14% to low 15% range that persisted from March 2010 through December 2016. Credit Card APRs, therefore, are now more or less at 12-year highs.
Time and again, I did not know how to handle my debt
Time and again, I did not know how to handle my debt. Even when I paid my credit cards off, a few months later I was back in the same situation. But this year is different. I contacted United Settlement...
Business debt relief is what I needed when I contacted the United Settlement crew
Business debt relief is what I needed when I contacted the United Settlement crew. They are committed to helping people like me who requires more help with business debt problems. I had several loans out...
Student loan debt was the reason that I reached out to United Settlement
Student loan debt was the reason that I reached out to United Settlement. I had about 200K plus in student loan debt for my business degree. I recognized that I had to do something when I struggled to make...
There is nothing worse than falling ill and then having to deal with super expensive medical bills
There is nothing worse than falling ill and then having to deal with super expensive medical bills that you really do not have the patience or experience to handle. I was pleased with my experience with...
I took out a few personal credit cards to open my boutique
I took out a few personal credit cards to open my boutique. When than money ran out, I went on to take out more loans for my business. However, this quickly turned into a disaster. Today, I now have a mountain...
Who knew that auto loans were so negative for your credit lines
Who knew that auto loans were so negative for your credit lines? Especially, if they are not paid off right away. As a married couple, we had vowed to keep auto loan debt at bay. But, we found ourselves...
I didn’t have a ton of debt when I contacted United Settlement
I didn’t have a ton of debt when I contacted United Settlement, but what I wanted from them was some information about how to handle my debt management. I knew that I needed some more information to get...
Federal student loans were the reason I ended up at United Settlement
Federal student loans were the reason I ended up at United Settlement. I had about $200K to pay back and I was not quite sure where to tackle that debt once I got out of school. But I reached out to that...
Everyone knows how horrible student loans are
Everyone knows how horrible student loans are. For me and my family, they had become more than just an annoying monthly bill. They had taken over our lives. That’s why I decided to take action and find...
I wanted to be more informed about my own personal and business debt
The number one reason I chose to contact United Settlement was I wanted to be more informed about my own personal and business debt. When you have credit card debt, it can be extremely frustrating. Especially...
I cannot believe I was finally able to find a company to actually help me pay off my debt
I cannot believe I was finally able to find a company to actually help me pay off my debt! I thought I would forever be chained to debt. But United Settlement offered me multiple solutions for paying off...
What your money can do for you.
The great reviews that you have thanks.
Dealing with high interest auto loan debt was difficult for me and my wife
Dealing with high interest auto loan debt was difficult for me and my wife. We thought we got a good deal, but it actually was a horrible loan. So, we reached out to United Settlement, and they got to work...
No one really wants to go bankrupt, and neither did my family
No one really wants to go bankrupt, and neither did my family. But fortunately, we did not have to go that route. It was our last resort, but United Settlement helped us figure out a way around bankruptcy...
I had been through about 5 different credit counseling agencies before I found United Settlement
I had been through about 5 different credit counseling agencies before I found United Settlement. I had read through their reviews and made the decision to move forward with them. I also was so impressed...
Save time and money
Just what I needed, already had a company I was working with and I switched because I was able to same some money. Brian and Alfred were really nice and helpful
As a business facing some unwanted financial difficulties
As a business facing some unwanted financial difficulties, we were at a loss for what to do next when our debt started to soar. We took a closer look at our financial situation by contacting United Settlement....
I had no clue how to create a debt management plan
I had no clue how to create a debt management plan and in fact, I didn't even know what a debt management plan was. Fortunately, I reached out to United Settlement before I had too much debt to tackle....
Being burdened by debt is one of the biggest struggles we faced as a family
Being burdened by debt is one of the biggest struggles we faced as a family. But these people at United Settlement were very helpful in deciphering the different debts we had and then coming up with a debt...
Student loan debt was my worst enemy before I ran into United Settlement
Student loan debt was my worst enemy before I ran into United Settlement. I really thought I would just have terrible credit for the rest of my life because I will never get out from underneath it. It was...