Why Is My Credit Card APR So High?

Looking at your monthly credit card statement and wondering why your credit card APR is so high? You’re not alone. Regardless of the balance you’re personally carrying, your credit card APR has a big impact on monthly payments. 

Let’s explore what a high APR means for your credit card, why rates might increase and what you can do to get a better rate. 

What is APR on a credit card?

Your credit card’s annual percentage rate (APR) represents the yearly cost of borrowing on a credit card. Credit card interest usually compounds daily. That means you’re being charged interest each day you carry a balance.

If you don’t pay your balance in full by the due date, your credit card company begins charging interest on the remaining balance. They do this by dividing your APR by 365 to determine your daily rate. For example, if your APR is 24%, your daily rate would be about 0.065%. 

While this might seem small, it compounds over time—each day, you’re charged interest on both your original balance and any accumulated interest. This compounding effect is why carrying a credit card balance can become expensive. 

Understanding APR vs. interest rate

While many people use these terms interchangeably, APR and interest rate aren’t the same thing. Your interest rate shows the basic cost of borrowing; your APR provides a more complete picture by including your interest rate plus any fees and additional costs.

For credit cards, your APR and interest rate are usually the same since most credit card fees—like annual fees, balance transfer fees or cash advance fees—are charged separately. However, many credit cards have different APRs for different types of transactions. For example, you might see:

• a purchase APR for regular purchases
• a balance transfer APR for transferred balances
• a cash advance APR for cash withdrawals
• a penalty APR that may apply if you miss payments

Why did my credit card APR increase?

Credit card companies can raise your APR for various reasons, and they’re often required to notify you about rate increases. Even if you have good credit, you might notice your credit card APR going up. Here are some reasons why.

• Prime rate changes: When the Federal Reserve adjusts interest rates, credit card APRs typically follow. Most credit cards have variable rates tied to the prime rate, which means your APR can change when the Fed makes adjustments.
• High credit balance: Carrying a high balance compared to your credit limit may trigger an APR increase. This is because higher credit utilization can signal increased risk to credit card companies.
• Late or missed payments: Missing payments or paying late might cause your credit card company to raise your APR. This is often called a "penalty APR" and can be significantly higher than your regular rate.
• Introductory APR ended: Many credit cards offer low or 0% introductory APRs that last for a specific period. When this promotional period ends, your rate will increase to the standard variable APR.
• Changes in credit score: A drop in your credit score could lead to a higher APR. This might happen if you’ve missed payments on any credit accounts, increased your credit utilization or applied for several new credit cards in a short time period.

What is a good APR for a credit card?

Credit card companies set APRs based on risk. The higher the risk, the higher the APR. That’s why consumers with lower credit scores usually see higher APRs, while those with excellent credit qualify for lower rates. Generally, a “good” APR depends on several factors, including your credit score and the type of card.

• Rewards credit cards: These cards typically have higher APRs to offset the cost of credit card rewards programs. If you’re seeing APRs between 18% and 24%, that’s fairly standard for a rewards card—even with good credit.
• Standard credit cards: Cards without rewards usually offer lower APRs. They may feature a lower ongoing variable APR compared to rewards cards, making it a good option if you occasionally carry a balance.
• Secured credit cards: These cards often have higher APRs since they’re designed for building credit. However, some secured cards may offer more competitive rates.

Most credit card issuers base interest rates on the prime rate, which can vary with market conditions and decisions made by the Federal Reserve. These days, lower APRs tend to fall below the 20% range, while high APR cards can reach as high as 30%. Currently, the average APR is just over 20%—even for people with excellent credit scores.¹

Can you negotiate a high APR?

Yes. Many cardholders don’t realize they can ask their credit card company for a lower rate. While there’s no guarantee they’ll say yes, it’s worth trying—especially if you’ve been making consistent, on-time payments.

Before you make the call, review your payment history and current credit score. A track record of responsible card use can be helpful. It’s also good to research credit card rates being offered to people with similar credit scores, especially if you’ve received other card offers with lower rates. This information can help during your negotiation. When you’re ready, contact your credit card company and politely explain why you believe you deserve a lower rate. 

5 tips to lower your APR on a credit card

Even if you can’t negotiate a lower APR, you have several options to reduce your credit card costs. The key is taking a proactive approach to managing your credit cards and overall financial health. Here’s what you can do to work toward better rates and lower interest charges:

1. Manage your credit responsibly. Maintaining a good credit score is key to qualifying for lower APRs. Make all your payments on time, keep your credit utilization low (ideally under 30%) and avoid applying for too many new credit cards at once. These habits show credit card companies you’re a responsible borrower.
2. Pay balances in full and on time. The best way to avoid high APR charges is to pay your full balance by the due date each month. Set up automatic payments or reminders to help you stay on track. If you can’t pay the full amount, try to pay more than the minimum to reduce interest charges.
3. Consider balance transfer options. Moving your credit card balance to another card with a low or 0% introductory APR can help give you breathing room to pay down your debt. Look for cards with low or no balance transfer fees and compare the length of promotional periods. Some cards offer a 0% intro APR for 12-18 months on transferred balances.
4. Watch for promotional deadlines. If you’re using a promotional rate, create a payoff plan before the regular APR kicks in. Calculate how much you need to pay each month to clear your balance during the promotional period. Mark your calendar with the end date and set reminders a few months before.
5. Consider debt consolidation. If you’re juggling multiple credit card balances, consolidating your debts could help. Some options include a personal loan with a lower fixed rate or a balance transfer to a single credit card. Both approaches give you one monthly payment to manage—and they could lower your interest costs.

Frequently asked questions about credit card APRs

Credit card balances and payments can be confusing, so we’ve answered some of the most common questions people ask about APRs and interest rates.

Why is my credit card APR so high right now even though I have good credit?

Even with good credit, your APR might be high due to factors like recent Federal Reserve rate increases, the type of card you have or changes in your credit utilization. The good news is you can often negotiate with your credit card company for a lower rate.

What happens when my 0% APR promotion ends?

When your promotional period expires, any remaining balance will start accruing interest at your card’s regular variable APR. This applies to both purchases and balance transfers. It’s important to know your promotional end date and plan to pay off your balance before then. 

Will my credit score drop if I ask for a lower APR?

No. Requesting a lower APR is considered a customer service inquiry and won’t affect your credit score. Credit card companies typically don’t perform a hard credit check when you ask for a rate reduction.

Do credit card companies have to notify me about APR increases?

Yes. Credit card companies are required by law to notify you at least 45 days before increasing your APR in most cases. The main exception is when your APR increases due to changes in the prime rate if you have a variable-rate card.

Can I have different APRs on the same credit card?

Yes. Your credit card might have different APRs for purchases, balance transfers and cash advances. You might also have a promotional APR on certain transactions while having a standard APR on others. Check your credit card agreement to understand all your card’s APRs.

Navy Federal Credit Union can help you save on credit card interest

At Navy Federal, we’re committed to helping you find the right credit card. Whether you’re looking to transfer a balance or just want a card with a competitive APR, we offer several card options. Our financial counselors can help you create a personalized plan to manage credit card debt and explore options that work for your budget.