De-Mystifying Credit Card Aprs
A Credit Article Contributed by Kris Griebe
What is a Credit Card Apr?
APR, in reference to a credit card, means "annual percentage rate". What does this mean to the average Joe? This is the rate of interest you will pay on any purchases you make using your credit card.
There are a wide range of credit cards on the market, each with their own APR. If you have poor credit, the APR will often be much higher than it would be if you have good credit. The idea is to find the credit card with the lowest possible APR, which will save you money.
The difference between a 19% APR and an 18% APR may seem small now, but what this 1% difference means is actually quite important. Pretend you spend $100.00 on an item. With a 19% APR, you are going to pay $19.00 in interest. With an 18% APR, you will pay $18.00. This may seem like a small amount, since it is only a $1.00 difference, but when you multiply it by larger sums, the difference can turn into a substantial amount of money.
How Do I Know the Apr of My Credit Card?
Typically, when you first apply for your credit card, the APR will be listed in the FAQ, or "Frequently Asked Questions" section of the website or letter. You'll also find your APR on your credit card monthly statement. Note: it is important to keep track of your APR to ensure that it does not go up without your knowledge.
Often a company will entice people to apply for their credit cards with a low introductory APR, which will then go up after a few months. So keeping track of your current APR, and reading all the fine print, will ensure that you have the best credit card for your needs.
How Does a Credit Card Company Determine My Apr?
Some companies have a fixed APR that they charge everyone, no matter their credit score. Others, more commonly, will assign you an APR based on your credit rating. The better your credit score is, the lower the APR they will award you. This is why it is vital to know what your credit score is, and make sure you keep your credit healthy.
When you apply for a credit card, the company requests a copy of your credit report from one of the three major credit agencies. Their trained professionals will analyze your score and make a decision that will affect not only your APR, but whether it is a "static" APR (meaning it will not change) or a "floating" APR which means it can rise or fall based on your performance.
Knowing your credit score before you apply for a credit card will help you obtain the lowest possible APR. Remember that what you're trying to get is a fixed APR, rather than the more deceiving floating APR. This will help keep you from falling into paying those outrageously high interest rates.
