• Thu. Jan 21st, 2021

Credit Card APR What Does It Mean

If you pay off your balance on time every month, you won’t be charged any interest a.k.a. APR on your purchase.

Not to be long winded, if you are still asking this question cut up your credit card. The interest rate you will be paying on your night out will prevent you from ever being able to save.

The APR is how the the Credit Card figures out how much interest you are going to pay.

How Do Credit Card Companies Charge APR

Many credit card companies offer a grace period for new purchases.

If however, you carry a balance from month to month, you’ll be charged, based on the APR, for the unpaid portion.

Not surprisingly they can at times charge you interest retroactively from the day of purchase.

The Difference Between APR and Interest Rate

It’s easy to lump interest rate and APR into the same category, but they’re actually two different types of rates.

Your interest rate is the percentage charged on the principal loan amount. In the case of a credit card, that loan amount would be your card balance.

Compared with interest rate, “APR is a broader measure of the cost of borrowing money,” according to the CFPB.

It includes the interest rate plus other costs, such as lender fees, closing costs and insurance. If there are no lender fees, the APR and interest rate may be the same—and that’s typically the case for credit cards.

How Is Your APR Calculated

Well like I said before I hope it never is but just incase I will explain.

Banks use an APR calculation formula to determine how much interest you pay on your outstanding balance. It can be calculated daily or monthly, depending on the card.

The costs that go into an APR calculation can vary, based on the type of loan you’re seeking. 

The Different Types of APR

There are different types of APRs, but typically you’ll have either a fixed APR or a variable APR.

Keep in mind, the APR can sometimes depend on the type of transaction. As you will find below. 

One big difference between fixed APR and variable APR is whether the rate changes over time.

While a fixed APR generally doesn’t change over the life of your loan, a variable APR is tied to an index interest rate that can change.

Fixed-rate APR

A fixed APR generally doesn’t change over the life of your loan. This may make budgeting easier, because the rate’s more predictable.

Variable APR

Variable APR is tied to an index interest rate, such as the prime rate. If the prime rate increases, so does your variable APR. So while the loan may have a low APR at first, the APR can increase over time. This can make it more difficult for you to plan your monthly budget.

Cash Advance APR

The cost of borrowing cash from your credit card tends to be higher. There may be different APRs for checks or for cash advances. And these transactions usually don’t have a grace period.

Penalty APR

If you violate the terms of your card’s contract—by doing things like missing a payment or being late with a payment—the APR on your card may increase.

Introductory APR

A new credit card may come with a lower, limited-time APR. It can apply to purchases or specific transactions like a balance transfer. 

Your credit card APR can be found on your monthly credit card statement.

My Take

I strongly suggest that if you need to borrow money find a free loan society. To many people have been paying their life away credit card debit that they have.

If you have debit, negotiate a settlement, or better yet ask around find the free loan society if they have a suggestion of someone that is experienced in credit card negotiations. You do not want to pay someone with out strong recommendations you will just owe more money.

Think about it like this, the average APR is like 29.99% that is 3000 dollars on a $10000 a year loan no principle paid. That means for the rest of your life that’s with your loan if you cant get to the principle.

Think about if you invested that money every year. In short you will be rich that will be our next post.

Other Great Reads For You. . Your Introduction To Credit Cards Bonds And Stocks Know What You Are Doing.

Looking forward to hearing from you,

Binyomin Terebelo

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