It’s very difficult to define a good interest rate on a credit card because there are so many factors that can determine the value of any one card. In the United States, there are rates that range between approximately 6% APR to nearly 40% APR. It might help to know that most department store cards have slightly less than 20% APR. Other countries may pay much higher interest rate amounts; Mexico may charge rates of between 30-50%, especially for store issued cards. As a result, defining “good” may be partly based upon a person’s location in the world.
In the US, the lowest rates that are not introductory offers usually sit at about 6%, and these are often offered to people with secured credit. This means that credit is usually backed by equity in homes or businesses. People looking for unsecured credit may be able to find cards with a rate of about 10%, though this is subject to change. These rates are not expected when people’s credit is less than perfect. Even with imperfect credit, many people can get cards that loan at about a 20% rate, and it probably isn’t a good idea to accept a card that charges more than that.
This doesn’t include introductory rates, which may be offered at 0% or a much lower fixed rate than is average. A 0% interest rate may apply to balance transfers or new purchases only, and these offers are usually time sensitive. People tempted by offers with no to low interest need to evaluate the actual rate once the introductory period is over.
Interest rates alone don’t determine a good credit card. Sometimes, a credit card with a higher rate allows people to accumulate lots of frequent flier miles, or gives cash back on purchases. It’s occasionally worth it to have a slightly higher rate if there are benefits that compensate for it, though this should be weighed carefully.
Not all low rates mean that people are getting superior cards. Consumers need to check for hidden fees, including those charged if the card isn’t used enough, for overuse of the card, additional charges for withdrawing cash, and exorbitant late payment amounts. Exceeding the credit limit may also kick fees into high gear.
When people always pay their cards off at the end of the month, a few points in interest rate, provided there is a grace period, really don’t matter. This figure becomes considerably more important when a person maintains a balance on a card. Higher balances do translate to greater cost to borrow money. Those with poor credit will typically pay higher rates, and they may have more trouble paying off balances. It may still be possible, if credit is imperfect, to get a slightly lower rate by scanning through credit offers and looking online.