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What is a Good Credit Card Rate?

Posted by Freedom First Credit Union on Mar 3, 2021 4:19:54 PM
Freedom First Credit Union

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It’s easy to fall for tempting credit cards offering exciting reward options. People are lured to them all the time. Unfortunately, when they do, they often get locked into exceedingly high-interest rates.

We want you to have a better understanding of credit card rates. Then you can make informed decisions about whether or not a credit card offer is simply “too good to be true” based on the interest rates you’ll pay to earn these rewards.

Why Credit Card Rates are So Important

Some rewards cards are quite extravagant, promising everything under the moon and stars, including:

  • Cash-back options
  • Air travel miles
  • Points for rewards

Almost every credit card company offers one or more rewards programs to their customers. They wouldn’t do so if it weren’t big business for them. They make a LOT of money from these rewards credit cards.

Most of these cards come with excessive interest rates as high as 29 percent in some cases. To fully understand why that is so important, let’s review a simple example. 

Assume you have a $5,000 credit card balance. You do not add to the balance and focus on paying off the card at a rate of $200 each month. How long will it take you to repay the total balance on your credit card?

Interest Rate (APR)

Interest Paid

Time to Payoff



29 months



32 months



36 months



39 months


As you can see, the amount of interest you pay makes a huge difference in the length of time it will take for you to be free of your debt and how much you will ultimately pay for the same $5,000 in debt. Honestly, you could have purchased a first-class plane ticket, and more, with the difference saved by having a 12 percent interest rate versus a 29 percent interest rate with miles and rewards.

Lower interest rates will always outweigh the benefits or perks of rewards cards unless you can pay your balance in full every single month.

In the example above, a 29 percent interest rate results in an additional $1,980 paid in interest and an additional 10 months to repay the debt when compared to a 12 percent interest rate.

Unfortunately, many people have their priorities reversed when exploring their credit card options, focusing first on the rewards and second on the interest rates. It should be the other way around. Your interest rate is the most important detail about your credit card.


So, what is a good interest rate?

Ideally, you want to have an interest rate at or below 12 percent.

One more thing to consider. Why aren’t credit union credit cards charging 29 percent Annual Percentage Rate (APR) like so many others? The answer is simple. Credit unions are not-for-profit financial institutions, and most cannot legally charge interest rates above 18 percent.

If most credit card companies’ and big banks’ rewards credit cards start around 18 percent APR, and credit unions are not legally allowed to charge rates over 18 percent, who has your best interest at heart?


We’re Here to Help!

We want all of our members to have access to a wealth of information and resources necessary to help make informed decisions when applying for credit cards and more. The lure of rewards can easily take the focus off what’s really important when it comes to credit cards - the interest rate.

Contact us today by visiting one of our convenient branch locations, calling us at 540-389-0244, or visiting our website to learn more about your credit card interest rate options and if we have a credit card that best fits your needs.

Topics: Interest Rates, Credit Cards, Freedom First News

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