What Is Considered a Low Interest Rate on a Credit Card?

Credit cards offer a convenient way to manage expenses and provide financial flexibility. This flexibility comes with a cost: interest, the fee paid for borrowing money. Understanding credit card interest rates is important for anyone using or considering a credit card. While a “low” interest rate might seem straightforward, it involves various factors.

Understanding Credit Card Interest Rates (APRs)

Credit card interest is primarily expressed as an Annual Percentage Rate (APR), representing the yearly cost of borrowing money. This rate applies to your outstanding balance.

Credit card issuers commonly calculate interest using the average daily balance method. They convert the annual APR into a daily periodic rate by dividing it by 365. This daily rate applies to your average daily balance throughout the billing cycle to determine the interest owed. Interest accrues daily on any unpaid balance.

Credit cards have several APR types, applicable to different transactions. The purchase APR applies to new purchases if you do not pay your balance in full by the due date. A balance transfer APR applies to balances moved from another credit card. Cash advance APRs are typically higher and apply when you withdraw cash. Lastly, a penalty APR can be imposed if you violate the card’s terms, such as making a late payment, and this rate is often significantly higher.

Defining a “Low” Credit Card Interest Rate

A “low” credit card interest rate is determined by comparing it against prevailing market averages and benchmark rates. The national average credit card APR for new offers has been around 24.35% in recent periods, while the average for all existing accounts assessed interest was approximately 22.25% in the second quarter of 2025. A rate significantly below these averages, perhaps in the range of 15% to 18% or lower, is generally considered a low interest rate for a standard credit card.

Many variable credit card APRs link directly to the Prime Rate, a benchmark interest rate published daily in the Wall Street Journal. The Prime Rate is currently 7.50% as of late 2024 and early 2025. Credit card APRs are typically structured as the Prime Rate plus a margin set by the card issuer. A lower margin added to the Prime Rate indicates a more favorable, lower interest rate for the cardholder.

While a rate below the national average is numerically low, the context of the rate also plays a role. An introductory rate, for example, might be 0% for a set period, which is exceptionally low but temporary. After this promotional period, a higher variable APR applies. For ongoing rates, a rate that consistently tracks below the market average, even if it is not 0%, can be considered low.

Factors Influencing Your Assigned Interest Rate

Credit card issuers consider several factors when determining an individual’s interest rate. Primary among these is creditworthiness, largely reflected in your credit score and credit history. A strong credit history, with consistent on-time payments, responsible credit use, and a diverse mix of credit types, generally leads to a lower assigned APR. Conversely, a lower credit score often results in a higher interest rate due to perceived increased risk.

Your debt-to-income (DTI) ratio can also influence the rate you receive. A high DTI, indicating a significant portion of your income is already committed to debt payments, may signal a higher risk to lenders. This can lead to a less favorable interest rate offer. Lenders assess this ratio to gauge your ability to manage additional debt responsibly.

Broader economic conditions also play a role in the general level of credit card APRs. Changes in the Federal Reserve’s federal funds rate, for instance, often lead to corresponding changes in the Prime Rate. Since many credit card APRs are tied to the Prime Rate, an increase in this benchmark rate can result in higher credit card interest rates across the market, and vice versa.

Different credit card issuers maintain distinct underwriting policies and risk appetites. This means that even for applicants with similar credit profiles, the specific APR offered can vary from one lender to another. Each issuer evaluates potential cardholders based on their internal criteria, which contributes to the range of rates available in the market.

Common Types of Low Interest Credit Card Offers

Several credit card offers provide lower interest rates, either temporarily or ongoing. One common category includes introductory 0% APR periods. These promotions offer a zero percent interest rate on new purchases and/or balance transfers for a specific duration, ranging from six to 21 months. A standard variable APR will apply to any remaining balance after the promotional period concludes.

Ongoing low variable APR cards are marketed for competitive interest rates that remain below the general market average after any initial promotional period. The interest rate on these cards usually fluctuates with the Prime Rate. These cards are often favored by individuals who anticipate carrying a balance and seek to minimize interest charges over the long term.

Some credit cards may offer a fixed interest rate, though less common. With a fixed-rate card, the interest rate does not change in response to fluctuations in the Prime Rate or broader economic conditions. Card issuers typically retain the right to change a fixed rate with advance notice to the cardholder, adhering to regulatory requirements.