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What Does APR Mean For Credit Cards?

by Violet WillettSeptember 3, 2021
What Does APR Mean For Credit Cards?

Credit cards come with a lot of liabilities, good liabilities. And that brings our attention to the term APR attached to it. 

A purchase annual percentage rate (APR) is the interest charged on purchases when you have a balance on your credit card. The APR of a credit card's advertised rates are typically an annualized percent that gets applied monthly to any outstanding balances. If the advertised APR for 19%, then 1.58% will be added each month until it reaches what was originally owed, if paid in full by before grace period ends between billing cycle and due date.

Credit card companies charge a lot of interest which can be avoided if you pay your balance in full each month by the due date.

Types Of APR

There are two types of APR depending on the bank; fixed APR and a variable APR.

The different types of APRs on credit cards can be confusing. While a fixed APR won’t change, variable APRs will and tend to track the Bank base rate which changes frequently. Credit card terms like this are often complicated so it is important you know what these mean before signing up for one!

APR vs. Interest Rate

You may think that your credit card’s interest rate and APR for purchases are two different things, but they actually mean the same thing. There are other APRs on top of this one to consider like annual fees or balance transfer fees, which aren’t factored into purchase rates because not every user incurs these types of expenses.

How Can You Get a Good APR?

By working to boost your credit health, you could qualify for a lower APR and save money. If you know that you'll be applying for a card soon, it might benefit by looking into ways of improving their scores so they are more likely to get the best interest rate possible when making purchases or taking out cash advances.

Annual Percentage Rate can sometimes help you understand how much interest is being applied to the credit card. However, it isn't always an accurate measure because APR doesn't take into account fees or other charges that are added during repayment for items such as credit insurance which protects against unemployment and/or disability and the Annual Percentage Rate may be helpful but there could also be additional costs involved.

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