How and Why Your Credit Card APR May Change

5 Min Read | Last updated: August 28, 2023

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This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

What causes credit card annual percentage rate (APR) changes? Anything from a shifting economy to late payments or changes in your credit score can trigger an APR to rise or fall.

At-A-Glance

There are a number of reasons why your credit card’s APR may change, some of which are outside of your control.
Some changes may be insignificant – especially if you’re paying off your full balance on time each month.
But if your APR goes up substantially, there are several things you can do to minimize the impact.

One reason that people apply for a new credit card is because of the annual percentage rate on purchases, better known as the APR. While credit cards usually have multiple APRs – an APR for purchases and different APRs for cash advances, balance transfers, and introductory rates – it’s the purchase APR that concerns most people. Variable purchase APRs aren’t set in stone, and this is something that could change over time.

With this in mind, let’s take a look at five common circumstances under which your card rate can change and what you might want to do about it if it does.¹

1. Your 0% Introductory APR Period Comes to an End

It may be smart to take advantage of a new 0% intro APR credit card promotional offer to finance a big purchase or transfer debt from a card with a higher rate. But the 0% intro rate will only last for a certain period of time before a higher rate kicks in. How much higher will depend on various factors – including your credit score. The average APR for all U.S. credit card account holders was 20.09% in February 2023.²

It’s important to keep tabs on when the 0% introductory rate ends and the new APR kicks in.

2. Your Payment Is Late

Paying a credit card bill late usually triggers a late fee and can lower your credit score. Once you’re 60 days or more overdue, your card issuer has the right to impose a penalty APR, which is often higher. With a penalty APR, the new rate may apply to your outstanding balance as well. On the flip side, if you make at least the minimum payment for six consecutive months, the card company is required to review your account.³

3. Your Credit Score Falls

If your credit score drops substantially, your card issuer may increase the variable purchase APR. Fortunately, you will get advance notice of at least 45 days if your card issuer is raising your rates for this reason, giving you an opportunity to pay down your outstanding balance or find a new card with a lower rate.

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4. Economic Conditions Shift

The APR on most credit cards is variable and is tied to the prime rate. If the prime rate goes up, your credit card APR will follow suit. And if the prime rate falls, your credit card APR will also decline. For a deeper dive, read “How Fed Rate Cuts Impact Your Credit Card Interest Rate.” Because minor fluctuations in the prime rate are common, you may not receive advance notice of these APR changes, which are usually quite small. If you don’t have an outstanding balance on your card – or if your balance is small – you may not to even notice the change.

5. Your Credit Card Passes Its First Birthday

Unless you’ve signed up for a special promotion with its own expiration, APR changes cannot go into effect for a full year after you first receive your credit card. But once the first 12 months are up, the issuer is free to raise your rate.

What Can I Do if My APR Increases?

If your APR goes up substantially, there are several things you may want to do:

Pay the balance in full. If you’re not carrying a balance from month to month, then you won’t have to pay interest on most purchases. Note that certain transactions such as balance transfers and cash advances may still incur interest charges.
Negotiate with your card issuer. Sometimes this can be as easy as calling your credit card company and asking for a lower rate. However, they may only consider your request if you always pay your bill on time and avoid carrying a large outstanding balance from month to month.
Apply for a new card and transfer your balance. If you can find a 0% introductory APR credit card that allows balance transfers, you may be able to transfer your balance from the old high-interest card to the new one.

Frequently Asked Questions

The best way to avoid paying interest rates on a credit card is to pay off your balance in full by the payment due date and avoid purchases that incur interest charges, such as cash advances and balance transfers. A temporary way to avoid interest is opening a 0% introductory period APR credit card and working to pay off the balance during the introductory period.

In many cases transferring a balance to a credit card with a lower APR can mean lower interest payments. Some balance transfer cards may offer 0% introductory APR, which means you wouldn’t have to pay interest on the balance during that window of time, as long as you pay the balance in full by the end of the introductory offer.

Credit card APR can change based on various factors, some of which are beyond your control. The prime rate dictates many minimum APRs, while your credit score, payment history, and more can also have an impact.

The Takeaway

There are a number of reasons why your credit card APR may change. But if you use your card responsibly, you can help to keep penalty APR increases at bay.

¹ “5 Reasons Your Credit Card’s APR Could Change,” The Ascent

² “Consumer Credit – G.19,” U.S. Federal Reserve

³ “What is penalty APR and how do you avoid it?,” Bankrate

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Elliot Kass is a journalist who has covered global business and technology from New York, London, and San Francisco for more than 30 years.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

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