The APR or the annual percentage rate is what many people use as the determining factor on which they base their choice of a credit card. The APR will have a great deal to do with the cost associated with the use of the card each year. Many card users do not have any idea what the APR is or how it functions. Many card users regularly use their credit cards without any knowledge of the fees involved so it is easy to overlook the APR’s role.
The annual percentage rate is the first question most people ask when they are looking for a credit card. The APR is the amount or rate of interest you will pay for all carryover balances on your card’s account. The use of added features such as 0% balance transfers or cash advances also affects the APR.
The determination of the APR is usually done on a yearly basis. The total balances carried over from month to month throughout the year are used to calculate the APR. The balances will be different at times and the APR may be changed and this will make the amount you pay different too.
As you look at several credit card offers before making a choice, you may quickly become aware that many cards carry more than one type of APR. There are about four APR types and each one is connected to a particular financial or account setup. There will be differences in which each of these APR’s are used by the different credit card companies
The introductory type of APR is just what the name implies. This rate is paid for a limited time period immediately after you are approved by the card issuer. Your normal APR will go into effect after whatever grace or no interest period ends.
The tiered APR operates at different levels based on the current outstanding balance on your card. The rate is made variable over time by a different rate being charged at one dollar amount verses another.
The adjustable APR is often called a penalty APR. This type of APR is used when the cardholder has a habit of making late payments or does not stay within the terms of the credit card policy.
Nearly all credit cards have separate APRs for cash advances, basic purchases, and balance transfers. It will cost you more for the extra services each year than on interest for the normal charges.
A distinct difference between APRs is whether it is a fixed or variable APR. A fixed APR will remain at a constant level except when the credit card issuer makes changes to your card’s APR policy. These changes cannot be made without written notification to the cardholder. A variable APR changes with the prime rate or fluctuations in Treasury bill interest rates.
You can benefit from having at least a working knowledge of how your APR works and you will be in a position to make better decisions on future use of your card. Also, you will be able to save some money for the future.
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