Are you paying enough attention to your credit card’s APR?

Apr 10, 2021

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Editor’s note: This post has been updated with new information.

The No. 1 rule for a winning credit card rewards strategy has nothing to do with comparing sign-up bonus offers or maximizing redemption value from your points. Instead, it’s much simpler: Pay your balance in full every month.

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As simple as that guiding principle sounds, it can be much more challenging to follow it. The average household credit card debt in 2020 was $5,315, according to data from Experian. Owing debt can negate the value of any points or cash back earned, particularly in today’s environment where credit card interest rates are setting record highs.

Related: How to earn points and miles with fair to poor credit

In this guide, we’ll provide some helpful tips on what to look out for when it comes to your credit card’s annual percentage rate.

Keep tabs on your APR

The bank that issued your credit cards can change your interest rate at any time, and you won’t receive a notification about it. For example, the rate on my Chase Sapphire Preferred Card card increased by 0.5% at some point in the past three months.

I’ve received plenty of emails from the bank on how to use my rewards points and why I should use its mobile payment system, but I haven’t received any reminders to monitor my APR. It makes sense, of course; banks aren’t looking for opportunities to call attention to the fact that you might have to pay them more money.

Getting a lower interest rate

(Photo by Shutterstock)

If you’re happy with your existing card and you’ve been a loyal, low-risk customer, you may want to give your issuer a call. A survey of more than 1,500 cardholders revealed that 56% of people who asked for lower interest rates had their requests approved.

Rather than simply asking for better terms, I recommend reviewing some of the preapproved offers you receive in the mail. Consider the APR ranges for your card — if the offer starts at a lower interest rate, be sure to mention it to the customer service representative. Just as airlines and hotels are willing to match elite status to appeal to customers, banks and card issuers may be willing to budge to retain customers.

However, if you’ve been carrying debt on your card from month to month, you may not have luck asking for a lower interest rate. Plus, knocking down your interest rate a couple of percentage points won’t make much of a difference. Instead, you should consider looking at a card with a balance transfer offer to move your debt to a card with an attractive 0% intro interest rate.

Related: 5 tips to make a successful balance transfer

While you’ll likely pay a balance transfer fee between 3% and 5% of the transferred amount, there are some notable exceptions. Even if you do pay a balance transfer fee, that initial chunk of cash can be worth it. Create a plan to attack and pay down your debt in the interest-free introductory period, and you can come out ahead of paying monthly finance charges.

Related: 6 simple rules to stay out of credit card debt

Bottom line

Before you get wrapped up in the world of points and miles, you’ll want to backtrack to the basics. If you’ve been carrying a balance while trying to collect rewards points, it’s time to shift your focus to locking in a lower interest rate, paying off your debt, improving your credit score and starting anew. It’s best to keep up with your credit card’s APR periodically so you won’t be hit with any surprises in the future.

Related: TPG’s 10 commandments of credit cards

Additional reporting by David McMullin.

Featured photo by Hero Images via Getty Images.

Chase Sapphire Preferred® Card

WELCOME OFFER: 80,000 Points


CARD HIGHLIGHTS: 3X points on dining and 2x points on travel, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

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More Things to Know
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®.
  • Enjoy benefits such as a $50 annual Ultimate Rewards Hotel Credit, 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases, plus more.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
  • With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
Regular APR
16.24% - 23.24% Variable
Annual Fee
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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