What is APR on a credit card?
APR (Annual Percentage Rate) represents the total cost of borrowing on a credit card, including interest and fees, expressed as a yearly percentage. APR helps you compare credit card costs. So, always check the representative APR before applying to understand the true cost of borrowing.
Different types of credit card APR
Purchases APR - the interest rate applied to everyday spending on your card.
Cash Advance APR - higher interest rate for cash withdrawals (often 30%+).
Introductory APR - a temporary lower rate, often 0% for a set period.
Penalty APR - a higher rate applied if you miss payments.
Most credit cards offer an interest-free period (up to 56 days), but only if you pay off your full balance each month.
Why the APR matters
It helps you compare credit cards - a lower APR can mean lower costs to you (but not always - more on that below).
It affects the cost of carrying debt - a high APR makes it expensive to carry a balance.
It impacts long-term interest charges - the higher the APR, the more you’ll owe if you don’t repay in full.
How do you minimise APR charges?
Pay off your balance in full each month - this avoids interest completely.
Take advantage of 0% introductory offers - some credit cards offer interest-free periods.
Look out for fees - some APRs include additional charges like annual fees.
The APR is a key factor when choosing a credit card. If you always pay in full, the APR doesn’t matter - but if you carry a balance, a lower APR can save you money.
This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.