What is Credit Card APR

Credit Card APR Is:
Annual Percentage Rate – or the amount of interest you pay over the course of the year.

More about the APR
Technically, the APR (annual percentage rate) is a numeric value of your annual interest rate.  When deciding between credit cards, the APR is typically the number one consideration people look at when determining if they will sign-up for the card or not.

APRs and Grace Periods
Some credit card companies apply what is known as the “grace period” on new purchases.  This means if you spend $500 on your credit card, you may have until the end of the billing cycle to pay it off in full without being charged interest on the new $500 balance that was added to your card.  This is important since this means if you pay your card off in full at the end of the month, your APR is essentially ZERO!

Calculating What You Owe
Most banks use a common formula to determine how much interest you owe and will pay on your outstanding balance.  They could use a daily or monthly rate – depending on the card.

Different Types of APR
Some cards will calculate different interest rates based on the type of the purchase.  For instance, you may pay 12% on typical purchases, where if you were to withdraw $200 from the ATM, you may pay 29% on that transaction.  You may also pay a different APR on penalty charges and if you’re lucky, they will lure you in with a low introductory APR – which may only last a few months or for an entire year.

Keep In Mind

  • APR can help you evaluate all offers and promotions
  • Lenders can not change the APR for the first 12 months (provided it is not a promotional APR)
  • Review all terms and conditions
  • In most cases, companies will give you 45 days notice before changing the APR