Credit Cards: Take a look at what APR means

Check out all you need to know about APR. In this article you will find all the details about therm APR. Keep reading to find out much more!

Check out all you need to know about APR. In this article you will find all the details about therm APR. Keep reading to find out much more!

You may have seen the term APR, or annual percentage rate, used in reference to everything from mortgages and auto loans to credit cards. In this piece, we look at credit card APRs—which you’ve probably seen listed on your monthly statements. Knowing what an APR is, how it’s calculated and how it’s applied can help you make more informed credit card decisions.

APR is an annualized representation of your interest rate. When deciding between credit cards, APR can help you compare how expensive a transaction will be on each one. It’s helpful to consider two main things about how APR works: how it’s applied and how it’s calculated.

APR is an annualized representation of your interest rate.

Generally, credit card companies offer a grace period for new purchases. If you only make purchases and pay off your ending balance each month by the due date, you pay just the amount you owe with no interest. However, if you opt to carry a balance on your card, you pay the agreed-upon interest on your outstanding balance.

Generally, credit card companies offer a grace period for new purchases.

Many variable interest rates start by using an index, such as the U.S. Prime Rate, and then add a margin. The result is the APR. Variable rates can change if the index changes and some banks offer a non-variable APR as well. 

Banks use a formula to determine how much interest you pay on your outstanding balance. They calculate it using a daily or monthly periodic rate, depending on the card.

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