What is APR on a credit card?
Written byEmily Tye
Updated:Dec 22, 2025
5 min read
APR (Annual Percentage Rate) represents the yearly cost of borrowing on a credit card, expressed as a percentage. It includes the interest rate and certain standard fees (like an annual fee, if there is one), but doesn't cover all possible extra charges such as late payment fees. Think of it as a sample price tag, designed to help you compare the cost of different cards.
In simple terms, a 29.9% APR means that for every £100 you spend and don't pay back for a year, it will cost you about £29.90 in interest and standard fees.
Basically, the higher the APR, the more you’ll owe if you don’t repay in full each month, so always check the representative APR before applying for a credit card.
What is a representative APR?
A representative APR is an advertised rate that at least 51% of people will get if their credit card application is successful.
It shows you the total cost of a credit card (interest plus standard fees) based on an imaginary £1,200 balance. Lenders use this same £1,200 example so you can easily compare different cards.
If you have a low credit score, you may still get accepted, but will likely be offered a higher 'personal APR'.
Let's break down a real-world representative APR example:
"Representative APR: Based on assumed borrowing of £1200 at an interest rate of 29.9% (variable) p.a. your representative APR will be 29.9% (variable)."
1. "Based on assumed borrowing of £1,200..."
This is like saying "if you were to spend £1,200 on your credit card...". The industry uses a standard imaginary spend of £1,200 to make comparison between cards easier.
2. "...at an interest rate of 29.9% (variable) p.a."
"29.9%" is the interest you pay on what you owe, "(variable)" means this rate can go up or down (usually if the Bank of England changes the base interest rate), and "p.a." just means per year.
3. "...your representative APR will be 29.9% (variable)."
This is like saying "all things considered (the interest plus mandatory fees), the total yearly cost of this card is 29.9%."
You'll notice that in this example, the interest rate and the APR are the same (both 29.9%). This tells you there is no annual fee on this card.
If the card had a £100 annual fee, the interest rate would still say 29.9%, but the APR would be higher because the APR has to include that fee in the 'total cost' calculation.
How does APR work?
Let's get a bit more specific, sticking to the same example as above.
If you borrowed £1,200 at a 29.9% APR and paid it off in equal monthly chunks over a year, you’d repay the £1,200, plus an additional £170 to £190 in interest over the course of a year.
That’s much less than a flat £358.80 (which is 29.9% of £1,200), because as you pay off the balance each month, there’s less for the lender to charge interest on.
If you never paid the money back and just let it sit there (ignoring late fees for a moment), the 29.9% APR describes the 'compounded' cost.
In month 1, they charge interest on your £1,200.
In month 2, they charge interest on your £1,200 plus the interest they added last month.
And so on. So interest is charged on both the original amount and the interest already accumulated.
In reality, credit cards require at least a minimum repayment each month, but these examples show how APR and compounding interest affect what you repay.
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 as much, but if you carry a balance, a lower APR can save you money.
What is a good APR for a credit card?
According to data from the Bank of England, the average credit card interest rate in November 2025 was 24.65%. This was the average rate for most of 2025, excluding June, when it rose to 24.67.
So, you could consider that a 'good' APR is equal to or less than the average (24.65%).
Generally, when it comes to APR, lower is usually better, but it isn’t always the most important number. Whether you should care about the APR depends on how you use the card.
If you are someone who pays their statement in full every single month, the APR doesn't matter as much because you will never pay interest. In this case, a card with a higher APR (like 35%) might actually be better than a low APR card if it offers great rewards (like cashback or air miles), that are more valuable to you than its annual fee (if there is one).
If you don't pay your full balance every month, the APR is the most important number to look at. In this case, you can ignore rewards and perks. A 1% cashback reward is useless if you are paying 30% interest on your debt. You would be much better off with a lower APR (like 10–15%).
Additionally, if you have a lower credit score, you are unlikely to receive the same APR as someone with a good credit score. So, an acceptable APR for one person wouldn't necessarily be acceptable for another.
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.
For more information, check out these guides:
This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.