Are You Paying Enough Attention to Your Credit Card’s APR?

Nov 11, 2018

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

The number-one rule for a winning credit card rewards strategy has nothing to do with comparing sign-up bonus offers or maximizing redemption value. Instead, it’s much simpler: Pay your balance in full every month. As simple as that guiding principle is, following it can be much more challenging. According to data from the National Foundation for Credit Counseling, nearly 40% of households in the US carries credit card debt from month to month. It’s an activity that negate the value of any points or cash back, particularly in today’s environment where credit card interest rates are setting record highs on a regular basis.

Tracking an Always-Evolving Number

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 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

If you’re happy with your existing card and you’ve been a loyal, low-risk customer, you may want to pick up the phone. A survey of more than 1,500 cardholders conducted by CreditCards.com revealed that 56% of people who asked for lower interest rates had their requests approved. Rather than simply ask for better terms, I recommend reviewing some of the pre-approved offers you receive in the mail. What are the APR ranges? If the offer starts at a lower interest rate, be sure to mention it to your existing bank’s customer service representative. Just as airlines and hotels are willing to match status to appeal to customers, banks may be willing to budge to entice or retain customers.

The Discover it® Miles carries a 3% intro balance transfer fee, up to 5% fee on future balance transfers and offer 14 months of 0% financing on purchases (then 13.49% – 24.49% variable APR applies)

 

However, if you’ve been carrying a load of debt from month to month, knocking down your interest rate from 17% to 14 or 15% isn’t going to make much difference. Instead, you may want to consider looking at a balance transfer offer and moving that load of debt to a card with an attractive 0% interest rate. You’ll probably pay a balance transfer fee between 3% and 5% of the total transferred amount, but there are some notable exceptions such as the Amex EveryDay® Credit Card from American Express. Even if you do pay a transfer fee, that initial chunk of extra cash can be worth it. If you have a plan to attack and pay down your debt in the interest-free introductory period, you can come out ahead of paying monthly finance charges.

The information for the Amex EveryDay card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Bottom Line

All signs continued to point upward for interest rates. The Federal Reserve is expected to raise rates three times in 2019, which will translate to higher rates on credit cards, too. If you’ve been carrying a balance while trying to add up rewards points, it’s time to shift your focus to locking in a low interest rate, paying off your debt, improving your credit score and starting anew.

Featured image courtesy of Hero Images via Getty Images.

2018 TPG Award Winner: Mid-Tier Card of the Year
Chase Sapphire Preferred® Card

WELCOME OFFER: 60,000 Points

TPG'S BONUS VALUATION*: $1,200

CARD HIGHLIGHTS: 2X points on all travel and dining, 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.

Apply Now
More Things to Know
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
Intro APR on Purchases
N/A
Regular APR
17.74% - 24.74% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

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.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.