Essential Things to Know About APRs

If you’re planning on applying for a credit card, there are a lot of things that you need to consider first. One of the major factors that you will need to think about to help you decide which credit card to apply for is the APR. APR stands for Annual Percentage Rate which is the rate at how much using the credit card for certain transactions will cost you over a single year.

Credit cards will always have an APR but not everyone who applies for a credit card will have the same APR. The lower the APR, the better the deal but these numbers vary about the applicant’s creditworthiness and other factors. This is the main reason why you need to learn how to calculate your APR to have an idea of what kind of APR you’ll have when you apply for a credit card.


If you want to learn more about APRs, check out the guide below.

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What is an APR?

An APR or an Annual Percentage Rate is the best and most common way to tell how much interest rate you’re going to incur by using your credit card.

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There are a lot of ways for you to incur an APR with different kinds of transactions. Some credit cards offer a lower APR while others have high percentages but it all depends on the kind of credit card you’re applying for and the kind of borrower you are.


APRs are annualized meaning it is the total interest rate you will incur every year even if the interest rates are calculated per month. This serves as a great overview of how much interest you are going to pay for an entire year which can help you with your budget.

How does APR Work?

APRs are set by your credit card issuer and once you have applied for the card, you will generally see an APR range before you even hit the apply button. The APR will be the interest rate that you’re charged for borrowing the funds on your card.

This is broken down into a daily rate for some while others tend to break it down monthly. The rate will determine how much you will need to pay in terms of the interest from borrowing the funds. You can, however, avoid interest charges by repaying what you used up in full or paying on or before the due date.


If you only pay a portion of the entire statement or the minimum amount, your interest rate will kick in and it will be added to your overall statement.

The Different Types of APR

There are a lot of different types of APRs that are charged to your account depending on the kind of transactions that you make with the card.

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You have the most common APR which is the purchase APR where you will be charged for purchases that you’ve made with your credit card. There is also a balance transfer APR w where you get charged for transferring a balance from one card to another.

An introductory APR is an APR specific for different transactions but has an expiration. A lot of introductory APR tends to be very low and even 0% APR which can be used to entice applicants to get a new credit card. There is also the cash advance APR where you get charged with a certain rate when you withdraw cash from your credit card.

Lastly, the penalty APR is charged when you miss a payment or you make a payment that is way beyond your due date.

Difference Between Fixed APR and Variable APR

Apart from the different kinds of APR, two specific types depend on how the rates fluctuate. These are the fixed APR and variable APR.

The variable APR is one of the most common forms of APR that is being used today by most credit cards. They fluctuate according to the Prime Rate so the percentage varies from time to time.

Meanwhile, a fixed APR does not fluctuate with the Prime Rate so you always have a fixed interest rate unless you incur a penalty APR.

How to Calculate Your Credit Card APR?

To calculate your credit card APR, all you need to do is convert the annual rate to a daily rate and take the daily amount that you have incurred and divide it by the total number of days in your billing cycle.

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This should be your average daily balance and all you need to do next is multiply it with the number of days in your billing cycle and you get a rough estimate of how much you get charged.

Remember that the interest rate will be recalculated and re-assessed every month so the rates will fluctuate from time to time.

Where to Find Your Credit Card’s APR?

If you don’t know where to find your credit card’s APR, there are three ways for you to look for them. You can log in to your account at the website or at any mobile banking app that you have linked your card to and check it out.

You should be able to see your current APR on your account or your most recent statement. Another way is to check your terms and conditions or your credit card agreement that you have agreed to before activating the card.

You can also find the variable APR on the application page. The credit card’s APR must always be visible on the application page as it is a standard rule.

Determining a Good APR for a Credit Card

It is worth noting that having a good APR for your credit card means that you are doing well with your responsibilities.

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Many credit card issuers often gauge their APR with your credit score. Determining a good APR for your credit card is rather simple.

If you encounter a credit card that offers an average range of 18% to 24%, you likely have a credit card with a good APR. Any credit card that goes beyond that range will be considered a secured credit card which is meant for credit building.

How to Lower Your APR

Even if your APR is currently sitting at the average range, you can still find a way to lower your APR to help you shed off some of the fees that you will be paying every month. If your goal is to lower your interest rate, you can call your credit card issuer and ask how you can lower your interest rate.

You can also do this by improving your credit score and paying off your credit card balance on time and in full. Those who want to improve their APR can also try to sign up for a different card and see if they offer a much lower APR.

You can then use a balance transfer card to transfer all of your balance into that card that has a lower APR.


Now that you know what APR is all about and how it works, you can now use this information to help compare credit cards to each other. This allows you to make good decisions on which credit card is worth applying for and which ones you should stay away from.