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What is an APR on a credit card?

Article author

Anushka

May 8, 2025

5 min read

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.

How is APR applied to a credit card?

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

  1. It helps you compare credit cards - a lower APR can mean lower costs to you (but not always - more on that below).

  2. It affects the cost of carrying debt - a high APR makes it expensive to carry a balance.

  3. 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?

  1. Pay off your balance in full each month - this avoids interest completely.

  2. Take advantage of 0% introductory offers - some credit cards offer interest-free periods.

  3. 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.