APR Credit Card

APR credit card simply means the interest applied to your account during a given billing period. APR credit card tells you the annual representation of your interest rate and informs you about what you’ll pay to add balance to your credit account.

APR credit cards

APR is abbreviated as Annual percentage rate which simply refers to some type of credit account.

What does an APR credit card means?

You may often come with the word APR which is the acronym of “Annual Percentage Representation”. This term is commonly associated with credit cards, auto loans, and mortgages. When it deals with credit cards, the term APR is simply the number of interest banks charge when you add a balance on their credit cards.

You should keep in mind that although, it is an annual representation the bank usually calculates the interest on a monthly basis.

Below are given the complete details about the APR credit card meaning, how it works, how to determine it, and types of APRs. So, keep scrolling down to gather all the information.

APRs and Interest rates:

The terms APR and interest rates are often used interchangeably in our daily lives however, they are slightly different.

:diamond_shape_with_a_dot_inside: When you get a credit card you’ll get info about the interest rate you have to pay. Basically, it is the charge on you for borrowing the money. Let’s suppose if you borrow 200£ and the annual interest rate is 10% a year, in such case you have to pay 210£ to clear the debt.

:diamond_shape_with_a_dot_inside: On the other hand, APR is generally a percentage expression that will let you know how much you would pay to borrow funds for a specific course of time. Additionally, APR also includes you paying some extra charges that might be applied to your accounts such as annual fees or arrangement fees. Therefore, the interest rate of a Credit card would be quite much less than the card’s APR, when an annual fee is added along.

You should mind that although, APR is an annual representation the bank usually calculates the interest on a monthly basis.

How the APR is determined:

Your APR credit card can be determined by the following steps:

:one: Initially, your daily percentage rate is calculated. This is done by analyzing your purchase annual percentage rate and divided by 365(no. of days in a year). For example, if your APR is 15% then your daily percentage rate is 0.0410%.

:two: Then determine your average daily balance. This is done by summing up all your balances at the end of each day in the billing period. Divide the obtained sum by the number of days in the billing period. This is your average daily balance.

:three: Your daily percentage rate is then multiplied by your average daily balance. The number which is obtained is then multiplied by the number of days in the billing period. With most producers, the interest aggravates regularly.

To conclude in a nutshell, your credit scores are the key factors in determining your APR.
The following formula explains the overall process or it might be called the APR credit card calculator.

Formula: :writing_hand:
Daily percentage rate × average daily balance × number of days in billing period = APR credit card.

How does APR credit card work?

Most often, many credit card companies come up with the benefit of providing the grace period for new purchases. The grace period begins at the end of the billing period and remains for around 21 days or more. During these 21 days, you can carry your new balance without facing additional charges. Moreover, the interest is also not changed when you keep your balance all paid on time every month.

:small_blue_diamond: However, if you carry some balance on your credit card, you might be charged with some interest, also you’ll lose your grace period for the upcoming few months even if the balance is added for a month only. The interest to be charged will depend upon your card’s APR, the amount of your balance, and the amount of your monthly payment.

:small_orange_diamond: You can also use special indexes to determine how much APR could cost if you add some balance and go through the partial monthly payments. One of the most important indexes, in this regard, is the US prime rate. The prime rate is the special scale used by famous banks which sets specific rates for their consumer products including credit cards.
The companies that lend these products set on their own additional margins to lessen the chances of default and earn profits on unpaid balances in the form of interest.

:small_blue_diamond: Recently, the US prime rate was found to be 3.25%, so if someone who is borrowing a loan has strong credit, they might be charges with an APR of 3.25% along with the lender’s margin of 10% which equates to almost 13.35% APR on a new account.
On the other hand, a person with poor credit may witness a higher risk and therefore may come up with an APR of 3.25% along with the lender’s margin of 20% which equates to a high APR of 23.25%.

Apart from examining the borrower’s creditworthiness and the prime rate index, the lender also can ensure about the financial records such as payment history, credit report, and debt to income ratio.

:arrow_down: Below the video will give you further detailed information about how does a credit cards APR works.

:white_check_mark: Types of APR credit cards:

There are many credit card companies that offer different consumer products including credit cards with different APRs. If you look at the different credit cards options, you’ll find different APRs with variable rates. Nearly all credit cards have different rates and if you are searching for the right credit card option, you need to know a bit about each of these types of APRs. All these are associated with any given card. Some are given below:

1.Introductory APR:

Also known as promotional APR, the introductory APR comes up with the lower promotional interest rate (less than the regular card APR) that allows the new customers with the new purchases or bank transfers or both but for a limited time that can be a few months or up to 18 months. Once the introductory period is over, the APR will be turned to increase to a variable rate that will depend upon your creditworthiness.

In short, introductory APR is offered by the companies as a perk for signing up with a specific card. Some companies may offer 0% introductory rates for some time.

2. Cash advance APR:

Cash advance APR is the rate of using credit for the withdrawal of money from an ATM or a bank account. The cash advance APRs might be prohibitive so you should not use them much. Moreover, these APRs don’t have any grace periods.

3. Purchase APR:

As the name indicates, Purchase APR is the interest implemented on all the purchases you make with your card. This amount is applied every time and everywhere no matter if you are making the purchases online, in person, or over the phone. This is the most common type of APR you’ll face with your credit card.

4. Penalty APR:

This one is indicated by the name as well. Penalty APR is generally the interest applied when you violate any agreement by not paying the payments on time. The penalty payments can be as higher as 29.9% or sometimes higher if the payment is late for 60 days.

You might also be asked to make few consecutive on-time payments before your penalty APR is removed.

5. Balance transfer APR:

Balance transfer APR is the rate applied on moving the existing balance from one credit card account to another credit card account. This can be done in a smarter way if the balance is transferred from a high APR credit card to a lower-rate card to remove the debt faster.

6. The representative or personal APR:

The above mentioned are the general types of credit card APRs. But there also is a broad category of APR. An APR might be personal or representative.

:low_brightness:Representative APR:

The representative APR is generally the rate displayed by the credit card lenders to advertise their credit card offers. It is said that out of 100%, only 51% of people are provided with the representative APR.

The majority of credit card companies obligate their employees to display representative examples of credit card deals to promote and advertise their financial services in the light of industry’s rules and regulations.

It should be noted that the representative APR displayed on the promotions and advertisements always means the credit card’s purchase rate which is the interest rate applied when you purchase things with the card. So, in this way, this can be a branch of purchase APR.

:low_brightness: Personal APR:

If you are not among the people offered with the representative APR, then you’ll get the personal APR. This one might be a bit higher than the previous one as it is completely based on your credit score.

Simply, the personal APR is the rate you are offered after applying for a credit card. Sometimes it is similar to the representative APR but not always. It is mostly related to your credit score and personal details such as salary and household expenses.

Your credit score generally refers to how you have managed your household bills and credit in the past. It also includes your age, previous credit agreements, homeownership, your job status, and your credit history; if you have joined any credit agreement.

7. Fixed vs. Variable APR:

While planning to get a new credit card, you may come across different listed as variable APR and fixed APR. Most APRs are variable but some also can be fixed though, the variable APRs are far more common than the fixed ones.

:low_brightness: Variable APRs:

As the name shows that the variable APR means that the card’s APR changes over time. As mentioned above, the variable APR change is dependent upon the index interest rate such as the US prime rate. When the prime rate is changed, it can automatically change the variable interest rates on the credit cards.

.:low_brightness: Fixed APRs:

Fixed APR credit cards are the rates that remain the same. This means that they are not compared with the index. But that won’t remain the same forever. This APRs mostly change after the expiration of any introductory period or any late payment. In some cases, the issuer is required to contact you before raising the rates.

What is a good APR for a credit card?

A good way to judge your APR credit card is the average rate which is reported to be 16.30% in 2021. Do you have a good APR or not depends upon a number of factors particularly your credit scores and the type of credit card you have.

With lower credit scores, you are likely to have higher APRs and with higher credit scores, you’ll have credit cards with low APR. So, you can get a good interest rate or APR by improving your credit score.

0 APR credit cards:

As mentioned above, some cards have promotional offers called introductory or representative APR credit cards. This APRs sometimes can charge 0% interest on purchases or balance transfers via banks or both, for a particular set of time.

For example, you might have come across an offer of “0 APR cards for 24 months”, “0 APR cards for 18 months” or “0 APR cards for 21 months”. If you choose either of these deals, it means that you have to pay 0% interest for a specific period of time if you use the card for spending.

APR credit card

Credit Cards With Low Apr:

Credit cards with low Apr are discussed shortly below with their ratings, annual fee, and featured benefits.

Capital One VentureOne Rewards Credit Card Ink Business Unlimited® Credit Card
No foreign transaction fees with $0 annual fee. 1. After spending $7,500 from account opening in the first 3 months, earn $750 bonus cashback.
Once $500 is spent from account opening you will earn a bonus of 20,000 miles. 2. On every purchase earn unlimited cashback of 1.5%.
3. On everyday purchase, earn unlimited 1.25X miles. It has no Annual Fee.
4. With no blackout dates travel anywhere with any airline, stay anytime at any hotel. Redeem rewards for gift cards, travel, cash back, and more through Chase Ultimate Rewards®.
5.No expiry for the miles also there is no limit to earning. 5. With employee cards at no additional cost earn rewards faster, you can also set limits for individual spending.
6. Over 15+ travel programs, Transfer your miles. 6. Card transactions will be monitored for any kind of fraudulent activity.
7. For 12 months purchases enjoy 0% intro APR. 7.For 12 months on purchases 0% introductory APR.

Average APR for Credit Cards:

Below the chart will help you compare the minimum and maximum APR of credit cards in the U.S. IS 15.56% to 22.87%.

Rewards Card Types Average MIinimum APR Average Maximum APR
Airline 15.49% 23.84%
Travel 15.16% 22.78%
5% cash back 15.11% 23.52%
Business 14.22% 22.19%
Hotel 15.22% 23.07%
Cash back 14.82% 22.81%
Store 21.18% 24.66%
Gas 15.44% 23.5%
Grocery 15.03% 23.31%
Excellent credit 14.68% 22.09%
Rewards 15.53% 23.09%
Student 15.27% 23.17%
No balance transfer fee 20.26% 23.57%
Balance transfer 13.67% 22.8%
Bad credit 20.15% 22.85%
Low interest 13.66% 23.12%
Good credit 14.92% 23.22%
Fair credit 21.85% 26.51%
0% APR 13% 23.15%
Starter cards for building credit 17.85% 22.37%
Secured 18.97% 19.29%
No annual fee 15.28% 23.07%
Unsecured 23.14% 25.8%

Summary: :writing_hand:
APR credit card simply means the interest that is applied to your credit account during the given billing period. It gives you complete information about what you’ll pay in interest and provides you effective criteria for shopping. There are some important processes to calculate and determine the APR. There are different types of APRs you need to know about before opting out of a credit card for yourself.

Frequently Asked Questions:

Here are some questions that are asked frequently regarding APR credit cards and they are as follows.

1. What is 24% APR on a credit card?

A credit card having a 24% APR is the rate you’re charged over 12 months which is 2% per month. If further, we talk about it into a daily periodic rate it will be the APR divided by 365which is per day 0.65% for a card with 24% APR.

2. Is a 24.99% APR good?

A 24.99% APR is not actually ideal for credit cards because the average APR on a credit card is 15.56% to 22.87%. A 24.99% APR is normal for personal loans Personal loan APRs range from around 4% to 36%.

3. Is APR monthly or yearly?

As APR is showed as an annual rate so the companies of credit cards use it to calculate the interest which is basically charged in the duration of your monthly statement period.

4. How many credit cards should a person have?

You should keep at least 2 credit cards one should be kept at home in a safe place other should be carried with you when going out it is a good idea to keep 2 credit cards because might be possible if you lost your card so at least have another one.

5. Is annual fee every month?

Mostly credit card annual fee is charged at the end of the day of the month when you are approved and also sometimes it will be charged as soon as you opened an account so it is possible that the annual fee may be charged in monthly installments.

6. Does canceling a card hurt credit?

Yes without being harmed you can cancel your credit and it will not affect your score. So closing a credit card will never impact your history of credits.

7. What is credit churning?

Churning is the repetition of the process of credit card opening and closing to earn miles, rewards, and earn cash. Also, you will be eligible to qualify for a large intro bonus after the opening of a new credit card.

8. What credit score do you need to get 0% financing on a car?

For borrowers with good credit 0% financing deals are reserved which is classified as a credit score of 800 and maybe above.

9. Is 10 percent APR good?

Yes! An APR having 10% is good for personal loans and credit cards because it is cheaper than the average. A 10% APR is not good for mortgages, auto loans, and student loans because it is very much high than what borrowers expect to pay. An APR of 10 % is also good for a credit card.

10. How can I avoid paying my credit card annual fee?

Several ways can help you avoiding paying your credit card annual fee and they are as follows.

  1. Call the issuer and convince him to free your fee in exchange for card usage.

  2. Ask the issuer to give you any other offer.

  3. Ask the issuer to cancel.

  4. Ask the issuer to switch to a different card.

  5. Use military benefits.

  6. Earn rewards to free your fee.

  7. Last option is to cancel your card.

Conclusion: :books:

Your APR is an important factor to know about your credit card bill. If you do not carry any balance on your credit card, you do not have to worry. But you should do gain a piece of complete knowledge about APRs when you carry a balance on your credit card. It will make it easier for you to budget your monthly credit card payments.

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