5.5 How to lower your credit card APR

In theory, the higher the credit card APR you are made to pay by the card issuer, the higher the cost of borrowing money on the card.

It is therefore reasonable to conclude that any way of lowering your APR would be welcomed as a good thing.

There are several ways in which you can lower your APR, but ultimately it will come down to your credit history so it is worth checking your credit report before you start.

Once you know the current status of your credit report, you will be in a better position to lower your credit card APR.

If you want to qualify for the card’s advertised typical APR, your credit score will need to be good enough to meet the lender’s criteria for this rate. Normally, you will have to have a ‘good’ to ‘excellent’ credit rating to qualify.

However, if your credit score means you don’t qualify for the typical APR, you should be able to reduce the chances of this happening again if you identify areas on your credit report that could be improved and work towards fixing them so that you are less of a risk to lenders (the compareandsave.com guide on ‘How to improve your credit rating’ can help you with this).

If you have a bad credit history, you probably won’t qualify for gold and platinum credit cards which, generally speaking, offer lower typical APRs than standard credit cards. On the other hand, if your credit score is good or excellent, and you currently use a standard, one way to lower your credit card APR could be to switch over to a gold or platinum credit card.

Gold and platinum credit cards generally come with higher credit limits and so issuers therefore place tighter restrictions on who can apply for the card. You will normally need to be 21 and over and have a minimum income of £10,000 a year to start applying for cards of these types. All issuers differ so some may increase or decrease these criteria.

Another way you could reduce your credit card APR would be to move your existing credit card debt to a life of balance transfer credit card as these come with a very low APR for the entire time you have the debt on the card.

There are two main advantages of having a low APR for the life of your credit card balance. Firstly, it means that you don’t have to remember when 0% deals will run out and consequently need to worry about what APR you will be charged after your interest-free period is up. Secondly, you won’t have to keep paying admin fees of between 2.5% and 3% if you choose to keep switching your debt from one 0% deal to another.

However, the disadvantage of a life of balance transfer credit card is that you will be paying interest on your balances when you could be on an interest-free deal for 9 to 15 months.

This brings us onto another way to lower your credit card APR – interest free credit cards. These are great if you want to reduce your APR because, at the end of the day, you can’t get much lower than 0%!

The last way you can work towards your APR is to make sure you compare credit cards. By comparing cards you can be sure that, no matter what your circumstances, you get the lowest APR that you possibly can.

Even if you have a bad credit history you will still find that the typical APRs for bad credit credit cards range between 34.9% and 39.9% p.a. (variable). If you didn’t compare credit cards, and just applied for the first one you came across, you could find that you end up paying 5% more per year in interest than you need to. 


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