The APR, or Annual Percentage Rate, on a credit card is one of the most important things most credit card holders will need to understand about their card. Very few people pay off their credit card each and every month, and that means the APR is the main way you can tell how much the credit card is going to cost you.
The short version of this is that the lower the APR, the better. Hopefully this is obvious. A lower APR means you will be paying less in interest, so the money you are borrowing will cost you less. The better your credit rating is, the better an APR you are likely to get from a credit card company.
Pay attention not only to the initial APR of the credit card, but also what happens after a few months. It is not uncommon for there to be an introductory APR then a higher one after the introductory period ends. What seems to be a great deal might not be so good over time. You should also know what happens to your APR if you are late with a payment. In most cases, it will skyrocket.
Your APR may change from time to time even if the card is considered to be a fixed rate credit card. If you read the fine print, the card issuer pretty much has the right to change your rate any time they please. However, if your APR keeps going up for no reason; you haven’t been late with a payment to ANYONE (not just the credit card), it may be time to give them a call and ask why it is going up.
Yes, that is correct. Your APR may go up even if you are always on time with your credit card payment but are late paying someone else. This means you need to be careful with all your bills to keep your rates low.
If your APR is going up for no reason and the card issuer refuses to lower it, it may be time to look for a new credit card. You can often get a new card with a lower rate. If you do this, look for one that has a low rate for balance transfers. If the rate is low on purchases but higher on balance transfers, changing credit cards may not do you any good.
When you use your credit card, remember that not paying it off greatly increases the cost of everything you buy with it. If you make the minimum payment on a large balance, you will have paid several times the original amount over a number of years.
To calculate your monthly interest rate, the company takes your APR and divides it by 12. The amount of money the interest rate is charged on is typically your average daily balance for that month.
Understanding your credit card’s APR can help you to see how much the money you are borrowing through that card is really costing you. It pays to be aware of what it really takes to pay off an outstanding balance over time. Watch your APR so that you can call and ask about any changes in your rate that you feel may be inappropriate.
Know Your
Credit Cards