What is APR
One of the first questions you should ask, when you go shopping for a credit card is,
what is the APR rate? That’s because, if you fail to pay the full amount on time, it can affect
how much you pay monthly.
APR is the annual percentage rate on a credit card. This is the interest you will be
paying per year. If you want to know, how much you will be paying per-day, you need to
take the APR and divide it by 365. Here is an example how APR works, let’s say you have
$100 balance on your account, and if your APR is 26%. If you pay the minimum on it,
you will be paying $26 interest on it per year, and any late fees or any other penalties.
The APR on all credit card varies, this is due to several reasons, such as your
credit card score, if you have a very good score, you will be getting the lowest APR.
But if your score is poor or if you don’t have any credit, most likely your APR will be
higher. These rates can be anywhere from 7% to 26%. Each credit card has different
APR, so make sure you read all the fine prints before you sign up.
Credit card companies use either fixed interest or variable interest for rates.
Fixed interest means the APR can change, but they will usually send you a notice,
telling you when it will change. Variable interest is based how interest rates are
doing plus 4%. The interest rates are measured by prime rates. You can search on line
for current prime rates.
When you don’t pay your bill full each month, the APR can affect the short term
use of your money. When you have $2000 charge on your credit card, and if you’re
paying the minimum each month. And if your APR is 15%, it can’t take you six years to
pay it off. In addition you would be paying around $1000 in interest. When you have low
a score, you would be paying more interest, which will take you longer to pay off your
balance. But when you have a good score your APR will be lower and you would be saving
money.
- Be aware of these APR rates, read the fine print to know what the actual APR
will be after the teaser rates(these are introductory rates for people who just sign up)
- know the default rate that’s if you don’t make the payment on time, your APR
will go up. ( Some are even if your one day late)
