Understanding APR: What is APR credit card?


You would be wondering about what does ‘APR’ really refers to or what is APR credit card. You would have come across this three letter word many-a-times when you search for credit cards. However, if you are a regular user of credit cards, you most probably would know about this term.

If you use a credit card, you would have surely seen the three letter acronym APR or the phrase Annual Percentage Rate on your monthly statement. But, it is not necessary that you know the meaning of it or understand what it is really about or maybe how it is calculated. Luckily, it is not so hard to understand APR.

This article will make you aware about everything you must know about what is APR credit card and what does APR means.

What is APR credit card?

APR is actually an acronym for ‘Annual Percentage Rate.’ It is the interest rate that is represented in numerals on your credit card statement and is calculated annually on a credit card. This APR interest is charged on a portion or all of the balance on a credit card, when the credit card holder does not pays the full amount on or prior to the due date.
When you want to choose between different credit cards, as to which one you should choose, the APR of a credit card will help you to compare how expensive each of your credit card transaction will be.

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Applying APR to a credit card

Different credit card companies offer different APRs on their cards. Let us see what the different types of APRs are.

1. Grace period
Some credit card providers offer a grace period on new purchase via your credit card. This is valid only when you make purchase through your card and pay off the end balance every month till the due date. This way you only have to pay only your owed amount with $0 interest. Nonetheless, if you tend to carry balance on your credit card, then you pay the agreed interest on your outstanding balance.

2. Different APRs as per the time period
Many credit cards charge different Annual Percentage Rates according to the time period. For example, a brand-new card may offer an ‘introductory’ rate as a special offer, or when you transfer balance from one card to another, you may be charged with ‘promotional’ rate. This shows that Annual Percentage Rates can vary over time.

In the beginning, credit card issuers may persuade you to make use of their card by providing promotional APRs with lower interest rates on some transaction types for a specified period of time. And, when this promotional period gets over, the Annual Percentage Rate may increase, in turn increasing the monthly balance carrying cost. However, if used wisely, the low promotional interest rates can help you save money in your credit card transactions.

3. Different APRs for different credit transactions
Annual Percentage Rates can also vary from transaction to transaction on some of the credit cards. For instance, a retail purchase transaction generally has a lower APR as compared to a cash advance transaction. This is because the credit card company considers a cash advance as a riskier transaction and it does not even earn a merchant fee on this type of transaction. Another example is APR can be different for balance transfers and purchases.

Thus, before you apply for a credit card, make sure that you thoroughly check what APR it is charging. You can do this by seeing the APR details on the credit card issuer’s website or in your credit card Agreement. All the information related to the Annual Percentage Rate of a credit card is displayed clearly in the form of a chart or comparison box.

If you know about the Annual Percentage Rate, you can make more wise and informed credit card decisions in your life. Then, you do not have to worry about the question what is APR credit card.