What is APR

The Annual Percentage Rate (APR) is the interest amount a customer will pay annually. It is possible to figure your interest charges per day by taking your APR and dividing this number by 365. However, most credit card companies compound interest rates. This means that your credit card fees will be higher than just this straight interest charge, especially if you carry a balance on your cards. If you have a balance you will also be charged interest on any interest charges that are not paid from the preceding month.

People with good credit are typically offered credit cards with low APR. People with poor credit will have much higher APRs. Rates will vary from 3 percent for good credit customers and up to 21 percent for people with poor credit. It is important to read fine print for each card because terms and APR is different for each card. Some credit card companies charge fixed interest rates and others have variable interest rates. If a credit card company charges a fixed rate that means that your APR may change, but the company is required to give you notice of a specific number of days. If a credit card company offers a variable interest rate, this means that your interest rates will change according to interest rates in general. Keep in mind what the current prime rate is because the prime rate is the standard for interest rates. Often variable rates will be the prime rate plus 3 percent. The prime rate can easily be found online. Always find out what the APR is of any credit card you are considering. The APR directly affects how expensive it will be to carry a balance on a credit card. Be aware that sometimes credit card companies carefully hide their APR rates and all fine print needs to be read carefully.

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