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My Credit Card APR Went Up. What Should I Do?

You have a few options, depending on your card issuer and credit score.

Jordi Salas / Getty Images

Credit card APRs have risen steadily over the last year -- and many card issuers have already started raising rates by another quarter of a percentage point, following the Federal Reserve’s latest rate hike announcement on Feb. 1.

The average credit card annual percentage rate is currently 20.28%, according to CreditCards.com, CNET’s sister site. Some credit card variable APRs are much higher, with maximum APRs reaching above 27%. Your actual credit card APR will vary based on your specific card and your credit profile.

With credit card APRs increasing again -- and more rate hikes on the horizon -- it’s even more expensive to carry a balance.

Although there may not be much you can do about your card’s APR going up, there are ways you can avoid APR altogether. Here are a few reasons why credit card APRs increase and how the changes affect you. Below, we’ll show you how to negotiate a lower APR and what to do if you’re denied. 

Why your credit card’s APR may go up 

An increase in your credit card’s APR depends on your card issuer and credit card agreement. Some reasons may be within your control, while others may not be. Here are a few common scenarios: 

  • You have a variable APR that’s impacted by the Fed. If your credit card’s APR is variable, it will change when the prime rate changes. The Fed’s rate hikes are tied to the prime rate, which banks use to determine credit card rates. 
  • Your introductory APR period ended. If your card has a 0% introductory APR, the new APR will go into effect when the promotion ends, causing your APR to go up. 
  • You missed a payment or made a late payment. Some credit card issuers issue a penalty APR, which can be as high as 29.99%. 
  • You have an outstanding credit card balance. If you’ve been in credit card debt for a while, the issuer may penalize you with a higher interest rate on purchases going forward, though not retroactively.  

Read more: Improve Your Credit Score Quickly With These Tips

How a higher variable APR affects you

If you’re carrying credit card debt, a higher APR means you’ll pay more interest on your outstanding balance. Even though the interest rate increase may seem small, the additional interest can quickly add up. Here’s an example: 

Let’s say you have a credit card with a 20% variable APR and you owe $6,000. If you pay $200 a month, it will take 42 months to pay off your balance, and you’ll pay approximately $2,380* in interest. If your variable APR increases by 0.25%, it could take you an extra month to pay it off, while costing you roughly $50 more in interest. That’s why experts recommend paying your credit card as quickly as you can

However, if you don’t carry a balance, a change in your credit card’s APR won’t mean much. The interest rate is only applicable if you don’t pay your balance on time and in full each month. 

You can use a credit card payoff calculator to help figure out how much you’ll pay in interest when paying off your credit card.

What the Fed’s rate hikes mean for credit card APRs

Even though the rate hike doesn’t control your credit card’s interest rate directly, a ripple effect occurs when the prime rate increases.

The Federal Reserve just issued the first rate hike of the year and the eighth consecutive increase to combat inflation. The 0.25% increase now puts the federal funds rate at 4.50% to 4.75%. As long as inflation remains high, the Fed will likely continue increasing the rate. 

Pushing the federal funds rate higher impacts the prime rate, which banks use to determine consumer lending interest rates. When the prime rate for banks increases, credit card issuers generally also increase their variable APRs. 

What to do if your credit card APR increases 

If your credit card APR goes up and you’re carrying a balance, here are a few options that may work in your favor. 

Negotiate a lower APR 

There’s a chance you could negotiate a lower APR with your credit card issuer. Before asking, take a look at your payment history and credit score to make sure there aren’t any red flags that would lessen your chances. It’s also best to research competitors to show your issuer what else is available. You may be less likely to get a lower interest rate if your debt-to-income ratio -- how much debt you carry versus how much money you make -- is high or your credit is less than ideal. 

If you’re denied, ask for an explanation. You may also be able to ask for a temporary interest rate reduction to pay less interest for a set period of time. 

Ask for a different card 

If your issuer offers other cards with lower APRs, you may consider asking to change cards. The same factors for negotiating a lower APR will still be considered. Keep in mind, even with a new card, the best APR that’s advertised isn’t always promised. It depends on your individual credit situation. 

Before asking, make sure you’re following good credit habits like keeping your credit utilization -- how much of your available credit you’re using -- low and making on-time payments to better your chances and avoid the variable APR altogether. 

Transfer your balance 

If you have credit card debt and your variable APR keeps going up, you may be able to transfer the balance. 

Opening a balance transfer card with a 0% introductory APR period means you won’t pay interest for a set time period. The goal is to pay the balance in full before the promotional offer ends and before the card’s regular APR kicks in. While this is a good way to minimize interest while paying down your debt, you will likely pay a balance transfer fee -- typically 3%.

If you choose this route, make sure you have a payoff plan before opening the account. Otherwise, you may wind up with a higher interest rate on the new card’s remaining balance. 

Consolidate your debt 

You may also consider a debt consolidation loan to combine all of your outstanding balances into one loan with a fixed interest rate. You’ll have one monthly payment and won’t have to worry about your APR going up. One thing to note is if you have less-than-perfect credit, your loan may have a higher interest rate. 

The bottom line

The best way to avoid worrying about rising interest rates is to pay your balance in full and on time each month. If you have credit card debt, make a plan to pay it off sooner rather than later to avoid higher interest rates that are likely to come. And if you can’t, there are options to help you pay less in interest, but it all starts with practicing good credit habits to improve your chances for a lower APR in a rising rate environment.

*The amount you pay in interest will vary depending on your credit card’s APR, any APR increases and your monthly payment.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

Dashia is a staff writer for CNET Money who covers all angles of personal finance, including credit cards and banking. From reviews to news coverage, she aims to help readers make more informed decisions about their money. Dashia was previously a staff writer at NextAdvisor, where she covered credit cards, taxes, banking B2B payments. She has also written about safety, home automation, technology and fintech.