What is an 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.
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
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.