What does credit card APR mean?

Written by barb nefer
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What does credit card APR mean?
A credit card APR is the rate of interest you pay annually. (credit card image by jimcox40 from Fotolia.com)

The initials "APR" stand for "annual percentage rate," so a credit card APR is the rate of interest you pay annually. There are different types of APRs, and the amount can vary widely among different credit card companies. If you have a credit card, you should understand what the APR is so you can try to get a better deal.

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Definition

Credit card APR means the annual percentage rate, or the amount of interest the card holder will pay in a year in addition to her regular balance. There is no standard APR in the credit card industry. The percentage can vary widely among different credit card issuers and even individual accounts issued by the same company.

Types

There are two types of credit card APR: fixed and variable. A fixed APR means the percentage doesn't change except under special circumstances. It can change if you request a reduction from the credit card company and it is granted, or if you do something that allows the company to raise the APR under your contractual agreement, such as make a late payment. A variable APR fluctuates based on the prime interest rate.

Rates

Fixed credit card APRs can vary from 0 per cent for an introductory offer or other special promotion to more than 20 per cent for high-risk customers. The regular rate is based on your overall credit history and your payment history with that particular credit card company. You may get occasional special offers, or you can call the card issuer and request a better rate if you have been a good customer. Variable APRs are usually a certain amount over the current prime interest rate, such as three points over prime.

Considerations

If you have credit cards with high APRs and have a good credit rating, shop around for cards with lower rates. Call your credit card issuer and ask if it will match the best offer you find. If the company refuses, you can open a new account with a lower APR and transfer the balance to there. You may be able to find a credit card company that gives you a low APR for a fixed period on balance transfers.

Warning

When you sign up for a credit card with a low APR, carefully read your agreement to understand the circumstances under which the issuer can automatically raise it. These may include a late payment or going over your credit limit. Also, check the APR for cash advances, because it is often significantly higher than the APR for purchases.

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