Interest rates are the cost of borrowing a loan, and your credit score decides what interest rate you’ll be getting.
Credit cards are a very common method of transactions- a lot of buying and selling happens on credit cards whether it be a small scale grocery transaction or getting a million dollars worth of inventory on credit.
Whatever the reason, you have to pay back the money you owe to your lender. And not just the principal amount (that you borrowed), but accumulated with an interest rate percentage that was decided in the beginning.
This is just an overview; let’s get into details.
Table of Contents
Credit Card Interest Rates
Interest rates are also referred to as APRs.
APR stands for Annual Percentage Rate, which is a combined figure of the interest rate AND any other fees liable on the loan. If there are no fees, the APR and interest rate remains the same. While comparing loans, the best way to do so is by comparing the APR rate because it includes all costs like broker fees, cost of procuring the loan etc.
The APR should always be greater than or equal to the nominal interest rate, except in the case of a specialized deal where a lender is offering a rebate on a portion of your interest expense.To get a great APR on a personal loan, lenders look for credit history. Your credit score plays a HUGE role when it comes to deciding APR, here’s how:
|Credit Score||Average Personal Loan APRs|
|Excellent (720 – 850)||10.3% – 12.5%|
|Good (680 – 719)||13.5% – 15.5%|
|Average (640 – 679)||17.8% – 19.9%|
|Poor (300 – 639)||28.5% – 32.0%|
For people with a poor credit, there might not be many lenders willing to lend. And if there are, it isn’t necessary that borrowers get the most competitive rates.
An APR (Annual Percentage Rate) is the rate by which you pay the credit card company for allowing you to borrow money upfront. In simple words, it is the cost you pay for borrowing money. This is charged on top of the money that you have borrowed each month, and of course, you have to pay the total amount next month.
Credit Card Interest Calculator
To calculate how much credit card monthly payments you will make with each installments, you can either do it manually or proceed to a credit card interest calculator online.
Firstly, you must enter your current balance on your credit card. Find the total amount of your current balance on your credit card statement and enter that amount in the first field. Do not include a dollar sign or commas in your entry.
Then, enter the current interest rate charged by your credit card. Your interest rate may be expressed on your statement as APR, or annual percentage rate. This may have changed since you first signed up for the card, so check your latest statement for the current rate. Enter the percentage interest rate without adding a percent sign.
After that, add your average monthly payment amount, in dollars, with no commas or dollar sign; or, to see how much interest you’d accrue over a specific time period, enter this number in months in the last field. For example, if you want to see how much interest you’d be charged over a two year period, enter “24” for 24 months.
The APR helps in evaluating loan costs. You can calculate APR very easily, just bring along a pen and paper and follow the steps.
- Add total interest paid over the duration of the loan to any additional fees.
- Divide by the amount of the loan.
- Divide by the total number of days in the loan term.
- Multiply by 365 to find the annual rate.
- Multiply by 100 to convert annual rate into a percentage.
And voila! You have got yourself the APR. Find your current APR and current balance in your credit card statement, and then divide your APR rate by 365 (for the 365 days in the year) to find your daily periodic rate. Lastly, multiply your current balance by your daily periodic rate. For example, if your APR is 18%, your daily rate is .00049 (.18/365). This is the amount that will be applied to your new balance each day until it is paid off.
What is a good Interest Rate on a Credit Card?
A decent interest rate for a credit card is 14% and underneath. That is generally the normal APR among credit card offers for individuals with incredible credit. Also, an incredible APR for a credit card is 0%. The privilege 0% credit card could assist you with staying away from premium altogether on first-class buys or lessen the expense of existing debt.
In the event that you need to get a credit card with a low interest rate, it’s imperative to realize where to look and what to search for. There are two kinds of cards that carry low interest rates: 0% interest rate cards and cards with low ongoing interest rate.
Zero percent interest rate cards normally offer no interest on purchases, balance transfers or both for a set period, ordinarily somewhere in the range of 6 and 21 months. However, when that advancement is finished, your interest rate could leap to a better than expected rate.
A credit card with a 0% interest rate introductory rate is a strong decision in the event that you have to pay down high interest credit card debt- and are certain you can pay the full balance before the advancement time frame closes and your rate spikes.
Then again, a credit card with a low continuous interest rate ordinarily won’t offer a 0% interest rate advancement. This might be a superior alternative in the event that you hope to carry a balance consistently.
In this table below, we have highlighted the lenders and typically what interest rate they have.
|Lender/Lending Platform||interest rate|
|Affirm||10.00% – 30.00% (0% interest rate offered at select retailers)|
|Alliant Credit Union||6.49% – 10.49% with AutoPay|
|American Express||6.90% – 19.98%|
|Avant||9.95% – 35.99%|
|Backed||2.90% – 15.99%|
|Best Egg||5.99% – 29.99%|
|Citibank||7.99% – 17.99% with discounts (rate may be higher)|
|Citizens Bank||6.80% – 20.91% with AutoPay|
|Discover Personal Loans||6.99% – 24.99%|
|E-LOAN||7.99% – 35.99%|
|Earnest||5.99% – 17.24%|
|FreedomPlus||7.99% – 29.99%|
|KeyBank||7.49% – 15.24% with AutoPay|
|LendingClub||6.95% – 35.89%|
|LendingPoint||9.99% – 35.99%|
|LightStream||4.99% – 19.99%|
|LoanStart||4.85% – 35.99%|
|Marcus||6.99% – 19.99%|
|Mariner Finance||Up to 36.00%|
|Mr. Amazing Loans||19.9% – 29.9%|
|Navy Federal Credit Union||8.19% – 18.00%|
|OneMain Financial||18.00% – 35.99%|
|Payoff||5.99% – 24.99%|
|Peerform||5.99% – 29.99%|
|PersonalLoans.com||5.99% – 35.99%|
|PNC Bank||5.99% – 25.49% with AutoPay|
|Prosper||6.95% – 35.99%|
|Regions Bank||7.50% – 18.83% with AutoPay|
|RocketLoans||7.161% – 29.99%|
|Santander Bank||6.99% – 16.99% with ePay|
|Self Lender||10.58% – 14.77%|
|SoFi||5.99% – 18.83% with AutoPay|
|TD Bank||6.99% – 18.99% with AutoPay|
|Upgrade||7.99% – 35.97%|
|Upstart||7.46% – 35.99%|
|Wells Fargo||5.49% – 22.99%|
Note: Sample rates have been extracted online, courtesy of ValuePenguin.
What is a good Interest Rate on a Mortgage?
A mortgage interest rate decides your regularly scheduled installments over the life of the credit. Indeed, even a slight contrast in rates can drive your regularly scheduled installments up or down, and you could pay a huge number of dollars pretty much in revenue over the credit’s term. Knowing how interest rates factor into your loan pricing, as well as what goes into determining your rate, will help you evaluate lender estimates with more precision.
A good interest rate on a 30-year fixed mortgage is 3.21%, as per information from S&P Global.
Even the state you’re buying your house in, could greatly affect the interest rate you’re charged on your mortgage.
|State||15-Year Fixed||30-Year Fixed|
|District of Columbia||2.59||3.05|
Note: Sample rates have been extracted online, courtesy of BusinessInsider.
What is considered a High Interest Rate?
Unless a credit card has a zero, or low, introductory, APR, interest paid on the balance is quite high. Credit card APRs are normally about 20%, which is generally high for any loan. A good rate of APRs is normally around 8-12%, however it is feasible for somebody with amazing credit to get even lower rates. This is because credit card debt is unsecured, meaning there is no collateral backing the loan.
If a good interest rate lies between 8% to 12%, then naturally anything higher than this figure is surely a high interest rate. You can personally set the threshold to 15%- more than that is definitely considered a high interest rate.
And for a person who has a poor credit rating, will get a high interest rate which may also exceed 20%.
Credit Card Interest Rates Today
According to BankRate, the current credit card interest rates today are as follows. This table highlights the 3-month trend of credit card interest rates in 2020.
To sum it all up, in very simple words, an interest rate is the cost of borrowing the loan and is charged on every installment that the borrower pays. Whereas an APR determines the cost of procuring the loan, broker fees and every other ‘hidden’ fees that may not be openly visible. An APR also includes the interest rate.
If you have an excellent credit score, you can get an interest rate as low as 8%, which is great. And a poor credit rating will get you a credit score more than 16%, and even more than 20%, which is obviously very high. It is obviously advisable to take the loan on your credit card when you know your credit rating is high, so get a low rate of interest on it.
If getting a credit card isn’t an emergency, you can always take a couple of months to improve your credit score by paying on time and make sure you don’t miss any credit deadlines from now on. Even the slightest effort can make such a big difference.