What Does Credit Card APR Mean?

The initials APR stand for annual percentage rate, so a credit card APR means the rate of interest that you pay annually. There are different types of APRs, and the amount can vary widely among different credit card companies. If you have a credit card, you should understand what the APR is so you can possibly get a better deal.

Definition

Credit card APR means the annual percentage rate, or the amount of interest that the card holder will pay in a year in addition to her regular balance. There is no standard APR in the credit card industry. The percentage can vary widely among different credit card issuers and even individual accounts issued by the same company.

Types

There are two types of credit card APR: fixed and variable. A fixed APR means that the percentage doesn't change exception under special circumstances. It can change if you request a reduction from the credit card company and it is granted, or if you do something--like make a late payment--that allows the company to raise the APR under your contractual agreement. A variable APR fluctuates based on the prime interest rate.

Rates

Fixed credit card APRs can vary from zero for an introductory offer or other special promotion to over 20 percent for high-risk customers. The regular rate is based on your overall credit history and your payment history with that particular credit card company. You may get occasional special offers, or you can call the card issuer and request a better rate if you have been a good customer. Variable APRs are usually a certain amount over the current prime interest rate, such as three points over prime.

Considerations

If you have credit cards with high APRs and have a good credit rating, shop around for cards with lower rates. Call your credit card issuer and ask if they will match the best offer you found. If they refuse, you can open a new card with a lower APR and transfer the balance to the new account. You may even be able to find a new credit card company that gives you zero APR for a fixed period on balance transfers.

Warning

When you sign up for a credit card with a low APR, carefully read your agreement to see the circumstances under which the issuer can automatically raise it. These may include a late payment or going over your credit limit. Also, check the APR for cash advances as it is often significantly higher than the APR for purchases.

References

• Resource for finding credit cards with low APRs