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When it comes to picking a new credit card, there’s one detail you should not overlook: the card’s annual percentage rate, or APR. This represents the rate lenders charge to borrow, including fees and interest. But credit cards don’t have one single rate, and it may be hard to evaluate what’s a good deal and what isn’t.

In general, a good APR is one that’s below the current average interest rate, which is 21.39%, according to the latest data from the Federal Reserve as of August 2025. However, what’s a good APR will also depend on the type of credit card, the various rates that could be assessed, and your own creditworthiness. This guide will take you through the details.

What Is an Annual Percentage Rate (APR)?

The APR on a credit card represents the total cost of the loan expressed in annual terms. A credit card’s APR includes the interest rate as well as any fees, including for late payments, foreign transactions, or returned payments.

Taking these fees into account when applying for a credit card helps to provide a fuller picture of what the loan may actually cost over its lifetime.

Keep in mind that APR is distinct from interest rate, which is simply the additional cost of borrowing money. Like APR, interest rate is typically expressed as a percentage of the principal. However, when looking at the average credit card interest rate vs. the average APR, you’re not comparing apples to apples.

For example, if a consumer takes out a $1,000 loan with a 10% simple interest rate and a one-year term, they will pay $1,100 over the lifetime of the loan — the principal $1,000 plus interest of $100.

While this example is extremely simplified, it’s helpful in demonstrating the difference between a simple interest rate and a not-so-simple APR calculation. If the consumer calculates the cost of the same $1,000 loan, considering the various fees that go into the APR, the number will likely be higher than the stated interest rate.

How Is APR Determined?

Knowing how APR is determined is an important part of understanding how credit cards work. A credit card’s APR is largely determined based on an individual’s financial specifics when they open the account.

•   The lender will look at the person’s credit score and credit history, as well as factors like their payment history and debt-to-income (DTI) ratio, which represents how much of an individual’s gross income is already going toward debt payments. In general, someone with a good payment history and credit score and a lower DTI ratio will qualify for a better APR.

•   However, APR isn’t only based on a borrower’s creditworthiness. Lenders will also take into account the current US prime rate, which is used to set rates on consumer loan products. Typically, a lender will take this rate and then bump it up a bit to minimize risk and increase profits.

•   Lastly, APR will vary based on the type of credit card. If you know what a credit card is, you’ll know all credit cards aren’t created equal. For instance, a credit card that offers lucrative rewards (like travel points or cash back) will generally have a higher APR than a more basic card.

When It Matters to Look at APR

If a consumer is comparing two similar loan or credit card offers, they may want to also look at the offer’s APR.

Say a person has two loan offers. Each is a $1,000 loan with an interest rate of 10%. With just that information to compare the two, they seem equal to each other. A little more digging, though, will uncover that Offer A has a $100 origination fee while Offer B only has a $50 origination fee — both of which could be calculated and accounted for in the offer’s APR.

With credit cards, it could be that two cards have the same interest rate, but Card A has no late payment fees, while Card B carries a 20% late payment fee, making its APR potentially higher.

When it comes to APR, the devil really is in the details. And reading the fine print can reveal that the APR could make a difference to your credit card balance and debt management.

Types of Credit Card APR

To further complicate the answer to the question of what’s a good APR for a credit card, it’s important to understand that, just as there are different types of credit cards, cards can have different types of APR. The main one you’re probably going to want to consider when considering your total cost of borrowing is the purchase APR. However, if you’re planning to take out a cash advance or do a balance transfer, you’ll want to look at those APRs as well.

Introductory APR or Promotional APR

Sometimes, cards will offer a lower (or even 0%) APR to new customers for a limited time after they open the account. This APR can apply to purchases or to balance transfers. Introductory or promotional APRs must last at least six months, but they can be longer, too. Once this period is up, the regular APR kicks in.

Purchase APR

The purchase APR is the rate that applies when you use your credit card to make a purchase and then carry a balance into the next billing cycle, perhaps only making the credit card minimum payment. This is the most commonly discussed type of APR, and the main one you’ll want to look out for when comparing credit cards.

Cash Advance APR

A cash advance APR applies if you withdraw money from an ATM or bank using a credit card. Unlike your purchase APR, this APR doesn’t have a grace period, meaning interest starts accruing immediately. Additionally, cash advance APRs tend to be on the higher side.

Penalty APR

If you fail to make your payments on time, the penalty APR will kick in, driving up your card’s previous APR to one that’s often much higher. This is why it’s always important to make your credit card payments on-time — even if you’re in the midst of disputing a credit card charge, for instance.

Balance Transfer APR

A balance transfer APR will apply when you transfer any balances from other cards onto your credit card account. Often, this APR is comparable to the purchase APR, though this can vary depending on the credit card company.

How to Evaluate and Compare APRs

To get a sense of a credit card’s APR, follow these steps:

•   First take a look at a card’s purchase APR range, and compare that to other credit cards. For a fair comparison, make sure to look at the same type of credit card. (For example, only compare travel rewards cards to other travel rewards cards, or a credit-building card to another credit-building card.)

•   Then, get into the nitty-gritty and look at the APR for different types of transactions. Even one credit card can have varying APRs on different transactions. For example, a card may have a different APR on late payment penalties than it does for balance transfers or cash advances.

•   Evaluate each APR and compare those to any other offer you may have in front of you to ensure you pick the most competitive option. It’s a good idea to attempt to seek out the lowest rate possible for your financial situation. That way, you can feel confident using your credit card for what you need to use it for — which might include paying taxes with a credit card.

Low vs High APR Credit Cards

As you’re evaluating credit card APRs, it’s important to keep in mind that some credit cards tend to have higher APRs than others. For example, rewards credit cards generally have higher APRs, but provide value through perks, discounts, points, or other benefits.

On the other hand, many low-interest cards come with fewer perks. But again, these cards can save someone money in the long run if they need to carry a balance from, say, covering a large purchase at an establishment that accepts credit card payments.

Low-interest cards also tend to be reserved for those with higher than average credit scores, so they may be harder to qualify for with lower credit.

What Is a Good APR for a Credit Card?

According to the Federal Reserve, the national average credit card APR was 21.39% as of August 2025. It’s reasonable to assume that an APR at or below the national average is considered “good.”

That said, qualifying for a “good” APR may hinge on a consumer’s credit score. For instance, someone with a below-average credit score may have a different definition of a good APR for a credit card compared to someone whose score is excellent.

APR and interest rates also change alongside federal interest rates changes. Because of this, it’s important for consumers to find the most recent data available on average credit card APR to ensure they aren’t relying on out-of-date information to inform their decision.

How to Avoid Paying APR

The APR a person qualifies for typically depends on their individual credit score. This means that those with credit scores on the higher end of the scale might qualify for lower APRs. If a consumer has a lower credit score, that doesn’t mean they’re totally out of luck, but they might be offered the same card at a higher APR.

However, there are a few ways a person can improve their chances of qualifying for a lower APR, and that starts by doing the work to build one’s credit score.

Tips for Qualifying for a Better APR

Here are some ways you can positively impact your credit score and potentially qualify for a lower APR.

•   One step is to check your credit report regularly for accuracy. US federal law allows consumers to get one free credit report annually from each of the three credit reporting agencies. Look out for any incorrect or suspicious charges. Even if you’d thought you’d resolved an issue related to a credit card skimmer, for instance, you’ll want to make sure those charges aren’t affecting your credit report in any way.

•   You can build your personal credit scores by making debt payments on time and trying to use only 30% of your available credit limit at any given time. Payment history accounts for 35% of the total credit score, and credit utilization — how much of a person’s total credit is being used at a given time — accounts for 30% of the total credit score. Also, try not to apply for multiple credit products in the space of a few months; that can negatively impact your score.

Rebuilding a poor credit score can take some time, but it’s worth the work.

The Takeaway

Currently, the average credit card APR is 21.39%, and anything below that could be considered a good rate. However, when it comes to what is a good APR for a credit card, the answer is that it depends on a variety of factors. It will also depend on your credit scores and history as well as what type of credit cards and rewards you’re looking for. When you do get a credit card, it’s important to use it wisely so that you don’t wind up getting charged higher penalty rates.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is a bad APR rate?

A bad APR for a credit card is generally one that’s well above the current national average credit card rate. APR for a credit card can vary widely, with some offering APRs as high as a whopping 36%:

What APR will I get with a 700 credit score?

A credit score of 700 is considered in the good range. It’s likely you could qualify for an APR around the average, though of course this will also depend on other factors, including the type of card and the current prime rate.

Does the interest rate on my credit card change?

Your credit card company can increase your interest rate. However, they are not permitted to do so within the first year of opening the account. Additionally, they must give you notice at least 45 days in advance.

What other financial products have an APR?

Many different types of lending products have APR. Beyond credit cards, this can include mortgages, car loans, and personal loans.

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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There is growing interest in using digital assets like crypto as part of retirement planning. This comes as federal agencies have started to lay the groundwork for a more robust regulatory framework for crypto, and more financial institutions are folding cryptocurrencies into their offerings. Certain established cryptocurrencies like Bitcoin have also seen marked growth over years of turbulent highs and lows.

However, if you’re considering the idea of holding crypto in an IRA, there are some important factors you need to know. Crypto is a complex, highly volatile asset, and there are significant risks to holding crypto in an IRA. In addition, it’s still more loosely regulated than many other types of assets. Here’s what individuals need to be aware of when it comes to a crypto IRA.

What Is a Crypto IRA?

A crypto IRA is an individual retirement account in which individuals can hold digital assets such as Bitcoin, Ethereum, or other cryptocurrencies in the account. A crypto IRA is sometimes referred to as a Bitcoin IRA (Bitcoin is the largest cryptocurrency in terms of total market value).

As cryptocurrency has gained more recognition in the last few years, there has been some interest in holding crypto in a retirement account like an IRA. Approximately 10% of Americans with a retirement account say they hold crypto in their account, according to a July 2025 survey by NerdWallet and The Harris Poll. Younger retirement savers are especially likely to hold crypto: 18% of millennials and 14% of Gen Zers say they have crypto as a retirement holding.

There are different types of IRAs, including traditional IRAs and Roth IRAs, and it’s possible to hold crypto in either one. Each has particular withdrawal rules and tax implications (see more about this below).

But whatever type of IRA an individual may be interested in, it’s important to be aware that IRAs are designed to be long-term savings accounts for retirement. Crypto is highly volatile and risky — if it drops in price, there could be serious negative implications for an individual’s retirement fund. Risk and volatility are factors individuals considering a crypto IRA should carefully consider.

Tax Considerations for a Crypto IRA

A crypto IRA has specific tax implications, depending on the type of IRA it is. For example, with a traditional IRA, individuals make contributions to the account with pre-tax dollars, and any earnings — from crypto or other assets — grow tax-deferred in the account. The account holder pays taxes on qualified withdrawals taken in retirement, which is considered by the IRS to be aged 59 ½ or older.

With a Roth IRA, contributions are made with after-tax dollars. Any earnings, including earnings from crypto, grow tax-free in the account. Qualified withdrawals — for individuals who are at least age 59 ½ and have had the Roth IRA for at least five years — are tax-free in retirement.

Crypto IRAs are subject to the same contribution limits as other IRAs. For 2025, the IRA contribution limits are $7,000 for those under age 50 and $8,000 for those age 50 or older. For 2026, the limits are $7,500 for those under age 50 and $8,600 for those age 50 or older.^[1]

Potential Benefits of Holding Crypto in an IRA

While a crypto IRA poses some significant risks, it may also have potential advantages. Possible benefits of holding crypto might include:

•   Access to an emerging asset class: Cryptocurrencies are still a relatively new asset class. Bitcoin, the first established cryptocurrency, launched in 2009, but it didn’t become popular until the Covid-19 pandemic more than a decade later. With a crypto IRA, individuals could get some exposure to this developing asset class.

•   Tax advantages: As mentioned earlier, crypto may grow tax deferred in a traditional IRA, or tax-free in Roth IRA, just like any other asset held in the IRA. That said, individuals with a crypto IRA may want to consult with a tax professional about the specifics.

•   Portfolio flexibility: Holding crypto within an IRA is a way for an individual to include another asset class beyond the more traditional types of assets, such as cash equivalents, stocks, or bonds, within their portfolio.

Risks and Limitations of a Crypto IRA

A crypto IRA has a number of risks, and individuals who are considering the idea of crypto for their retirement account should weigh the drawbacks very carefully. Risks include:

•   Volatility: Cryptocurrencies are highly volatile. For example, there have been several periods when the price of Bitcoin plummeted more than 60% in value, including a 64% drop in 2022. By some estimates, Bitcoin can be up to 5 times more volatile than stocks and bonds.^[2]

•   High-risk asset: Crypto is a speculative asset and it can have a high degree of price volatility as noted above. Individuals who have a low tolerance for risk, or those who are close to retirement age when they will need their savings, may not be well suited to a crypto IRA.

•   Evolving regulations: While federal crypto regulations offering consumer protections have started to take root, they are in the relatively early stages of development. In addition, not all crypto IRA custodians (the financial institution that sets up the IRA) may follow the same level of safe security practices for crypto, which could lead to the assets not being handled properly.

•   Fees: Crypto IRAs generally come with more fees than conventional IRAs. For example, some crypto IRA providers may charge individuals to set up a crypto IRA. In addition to set-up fees, other possible fees include annual maintenance fees, transaction fees, and fees for holding the assets, which are typically known as custody fees. Fees vary by provider, so individuals considering a crypto IRA should compare providers.

How to Get Started With a Crypto IRA

Opening a crypto IRA typically involves several steps.

1.    Choose a crypto IRA custodian. Interested individuals should do some research to find providers that offer a crypto IRA. Some major brokerages now offer these accounts. Other crypto custodians include specialized firms that offer self-directed IRAs (SDIRAs) that are designed to hold cryptocurrencies. Individuals can look for a crypto custodian they feel comfortable with.

2.    Understand fees and account requirements. While evaluating crypto IRA providers, inquire about any fees charged and other account requirements. Ask how crypto assets will be stored and what security measures the company has in place. Compare providers’ policies and fee structures.

3.    Open the account. Once an individual has chosen a provider, they can open a crypto IRA account. They’ll typically need to provide their personal information, such as name and address, Social Security number, and bank account information.

4.    Fund the account. Individuals can fund their crypto IRA with money directly from their bank account. Depending on the type of IRA it is, they can use pre-tax or after-tax dollars. They can then make crypto transactions within the account.

Decide if a Crypto IRA is Right for You

A crypto IRA may be of interest to some individuals seeking exposure to this emerging asset class, but there are also some significant drawbacks to these accounts. Crypto IRAs involve high risk, are extremely volatile, and have fewer protective regulations than many other assets. For those close to retirement age or individuals with a low tolerance for risk, a crypto may not make sense.

While a crypto IRA does have potential advantages, including certain tax benefits, it’s important to carefully weigh the pros and the cons of these accounts. Individuals should consider their risk tolerance, savings timeline, and financial goals before making a decision.

The Takeaway

Crypto IRAs are a type of retirement savings vehicle in which individuals can hold cryptocurrencies in the account. Crypto IRAs may have potential benefits for some individuals, but they also come with significant risks, including high volatility, evolving regulations, and possibly higher fees. It’s wise for individuals to do their research and investigate these accounts thoroughly to make sure a crypto IRA is right for them.

SoFi Crypto is back. SoFi members can now buy, sell, and hold cryptocurrencies on a platform with the safeguards of a bank. Access 25+ cryptocurrencies, such as Bitcoin, Ethereum, and Solana, with the first national chartered bank to offer crypto trading. Now you can manage your banking, investing, borrowing, and crypto all in one place, giving you more control over your money.

FAQs

Is it a good idea to put crypto in a retirement account?

Whether it’s a good idea to put crypto in a retirement account depends on an individual’s risk tolerance, retirement savings timeline, and financial goals. Cryptocurrencies are highly volatile and risky assets, and there is a potential for financial losses.

What is a self-directed IRA (SDIRA)?

A self-directed IRA (SDIRA) is an IRA that allows individuals exposure to a broader range of assets than conventional IRAs. These assets may include crypto. With a SDIRA, the account holder has full control and management over the assets in their account.

What are the tax advantages of a crypto IRA?

Tax advantages of a crypto IRA depend on the type of IRA it is. With a traditional IRA, contributions are made with pre-tax dollars, earnings grow in the account tax-deferred, and an individual pays taxes on withdrawals in retirement. With a Roth IRA, contributions are made with after-tax dollars, and earnings in the account grow tax-free. Withdrawals are tax-free in retirement.

Are the fees higher for a crypto IRA than a traditional one?

Crypto IRAs (sometimes referred to as Bitcoin IRAs) generally have higher fees than conventional IRAs. Fees vary by provider, and possible charges may include set-up fees, custody fees, annual maintenance fees, and transaction fees.

Can I add crypto to my existing 401(k) or Roth IRA?

Generally speaking, no. It’s difficult to add crypto to an existing 401(k) since the assets you can choose from depend on what your employer offers. With a Roth IRA, you would need to have an IRA custodian that offers crypto assets, such as a Bitcoin ETF. You could instead set up a self-directed IRA or a crypto IRA and add crypto to that account.

Photo credit: iStock/kate_sept2004

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Brokerage accounts offer a way into the financial markets: think stocks, bonds, and other securities. Your account enables you to buy, sell, and trade these products. Not all brokerages operate the same way; nor do they all offer the same types of investments. We’ll break down what brokerage accounts are, the different account types available, and how they differ from other financial accounts.

What Is a Brokerage Account?

A brokerage account is a type of investing tool offered by investment firms. These accounts allow people to invest their money by buying and selling stocks, bonds, exchange-traded funds (ETFs), and other types of securities.

These accounts are typically flexible and come in various forms, catering to different needs and experience levels. For prospective investors, knowing what a brokerage account is and how they work is important. For seasoned investors, learning even more about them can help deepen their knowledge, too.

What Is a Brokerage Account Used For?

Brokerage accounts open up the world of online investing or investing through a broker in stocks and allows investors to conduct other transactions, such as options trading. They are offered by different types of financial firms as well. Here’s a breakdown of different brokerage accounts, and what each might be used for:

You can start the application either online or in-person. You can then fund your account by transferring money from a checking or savings account.

Some brokerage firms require investors to use cash to open their accounts, and to ensure they have sufficient funding to cover the cost of their investments (as well as any commission fees). Some do not require an initial deposit, however.

Brokerage accounts generally do not have restrictions on deposit or withdrawals. This makes them different from retirement accounts, which typically have more transaction limits or restrictions. Investors do need to claim any profits that they withdraw from their account as taxable income.^[1]

Here’s a closer look at how brokerage firm accounts differ from other types of money accounts.


💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

How Are Brokerage Accounts Different From Bank Accounts?

Brokerage accounts and checking accounts have one key similarity: both can hold cash. Brokerage accounts will often “sweep” your cash holdings into a money market fund that’s managed by that same brokerage, so that it may potentially earn interest.

Benefits of Having a Brokerage Account

The biggest benefit of a brokerage account is the opportunity to invest. Although a money market account could accrue interest, its funds are designed to be invested rather than held. These accounts come with other advantages as well.

Top 3 Types of Brokerage Accounts Explained

There are several types of brokerage accounts: cash brokerage accounts, margin accounts, and discretionary accounts.

1. Cash Brokerage Accounts

Cash brokerage accounts are a straightforward option for investors who want to trade securities without using borrowed funds, or leverage, as you would with a margin account. These accounts only let you invest with the cash you deposit, which can be a simpler approach to investing.

Features:

Pros and Cons:

Brokerage accounts are simple, offer flexibility, and often do not have maintenance fees. They do not offer leverage, which can affect your trading strategies. They may be best for investors seeking simplicity.

2. Margin Brokerage Accounts

Margin brokerage accounts let you use margin when trading. You can effectively borrow money to trade with directly from the brokerage. Thus, you may require approval from a brokerage to open an account. There’s a higher degree of risk with these accounts than cash brokerage accounts, given that you are borrowing money to invest with. There is a significant risk of loss as well as gain.^[4]

Features:

Pros and Cons:

Margin accounts increase purchasing power, allowing investors to make larger trades, potentially leading to higher returns and the opportunity to profit from short selling. However, these benefits come with increased risk, as losses can be amplified, interest costs add up, and margin alerts may require investors to deposit additional funds or sell assets, making careful management essential.

3. Prime Brokerage Accounts

Prime brokerage accounts are designed mostly for institutional investors and high-net-worth individuals. These accounts offer advanced services (e.g., margin trading, securities lending) and proprietary research. These are sophisticated tools designed for experienced traders.

Features:

Pros and Cons:

Prime brokers offer access to leverage, allowing clients to borrow funds for margin trading and enhance potential returns, while also providing tailored services for institutional investors or high-net-worth individuals. However, these advantages come with increased risk, as borrowing funds for margin trading amplifies potential losses.

Other Types of Brokerage Accounts

In addition to cash, margin, and joint brokerage accounts, there are other account types that serve specific needs and investment strategies. These accounts cater to different financial goals, investor preferences, and tax implications. Some common alternatives include:

Each of these account types has unique benefits, tax treatments, and management structures designed to meet specific financial objectives. Depending on your investment goals, it may be advantageous to explore these alternatives to maximize returns and minimize tax liabilities.

How to Choose the Right Brokerage Account for You

Choosing the right brokerage account depends on your investment goals and risk tolerance. For those looking to amplify their investments, a margin account offers leverage, though with added risk. Joint accounts are ideal for shared investments, while more experienced investors may opt for managed or discretionary accounts for professional guidance. Your decision should align with your financial objectives, time horizon, and comfort with risk.

The Takeaway

Brokerage accounts allow owners to buy and sell investments and financial securities. They are offered by a number of financial institutions, and come in a few different types. By and large, though, they’re a very popular choice for investors looking to get their money in the markets.

They do have their pros and cons and associated risks, however. It may be beneficial to speak with a financial professional to learn more about how you can use a brokerage account to your advantage in pursuit of your financial goals.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What is the minimum needed to open a brokerage account?

Different brokerage firms will have different rules regarding minimum deposits, but there are many that don’t require a minimum deposit. Again, it’ll depend on the specific firm.

Can I withdraw money from a brokerage account?

You can withdraw money from a brokerage account by transferring funds to a linked bank account, or by requesting a check or wire transfer. Keep in mind that any profits may be subject to capital gains tax, which may vary depending on how long you’ve held the assets among other factors.

Do you pay taxes on brokerage accounts?

The capital gains, dividends, and interest income earned in the account are all taxable, with long-term capital gains benefiting from lower tax rates compared to short-term gains. The specific tax rate depends on factors, such as how long you hold an asset and your overall income, so it’s best to consult with a tax professional for guidance.

About the author

Samuel Becker

Sam Becker is a freelance writer and journalist based near New York City. He is a native of the Pacific Northwest, and a graduate of Washington State University, and his work has appeared in and on Fortune, CNBC, Time, and more. Read full bio.