In credit card terms, the “APR” is the Annual Percentage Rate that you will be charged on unpaid balances. Different credit card companies may offer a number of options to customers. Each card they offer may have different interest rates and terms. It’s important for consumers to be aware of all of their options when it comes to choosing the right card for their needs.
The Annual Percentage Rate that a credit card company will charge a customer depends on his or her credit history. If you have a low credit score or have never had credit in your own name, you will be charged a higher interest rate. Over time, as you establish credit or pay your bills on time, your credit score will improve. You will qualify for better interest rates as a result.
How the APR Affects Your Bill
The APR you are charged will not make much difference if you are able to pay off your account in full each month. Many people carry a balance from month to month, and they are charged interest on this amount as a result.
Credit cards vary as to the number of days that are “interest free” after a customer makes a purchase. If you are able to pay off the bill within the grace period, then no interest is charged on the purchase. Carrying a balance means that the credit card company charges interest on new purchases, as well as the previous unpaid balance.
For this reason, making only the minimum payment on your credit card account means that the amount you owe will continue to increase over time. When considering which credit card is the right one for you, look at the annual interest rate and find out how it is calculated.
If you get a cash advance from your credit card, you need to be aware that you may be charged a higher APR for the privilege of accessing your account in this way. The interest on the cash advance is calculated at a daily rate from the day you took the money from your account. Depending on how the credit card company allocates your payment, it may not be credited to your cash advance first. The payment may be applied to other purchases first.
The credit card company has the option of increasing the APR for customers on a fixed-rate card at any time. They are legally required to give you at least 15 days notice in writing of the change. If you choose a variable rate credit card for your needs, the APR will go up and down with changes in the prime rate.
If you are late with a payment or skip one, be prepared for the credit card company to adjust your APR. With some credit card issuers, even being a few days late may mean that your APR will be adjusted upward. Making less than the minimum payment on your account can also lead to your being charged a higher rate of interest.
New credit card customers should read their cardholder agreement carefully to ensure that they understand how their APR is calculated. New account holders may be offered a low introductory APR as an incentive to apply for credit from that provider. Be sure you find out how long the lower APR will be in effect and whether it applies to balance transfers only.
Some credit card issuers will offer the lower rate on balance transfers only. Any new purchases that are charged to the card will be billed at the card’s regular APR. Introductory rates are usually only offered for a certain amount of time. After six or 12 months, the entire amount owing on the card will be billed at the regular interest rate.
Shop Around for Best Annual Interest Rates
How do you know you are getting the best possible interest rate on your credit cards? Shopping around to see what other companies are offering can give you the information you need. You also have the option of contacting your existing credit card company to see if they have a lower interest rate card that you would qualify for. If so, you could consider transferring your balance to the new account and lowering your monthly payments.
Why don’t you get started considering whether you are getting the best credit card APR right now? The free credit card Chaser tool on our home page can help you. Click on it to compare credit cards today!
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