Credit Card Aprs : the Numbers Behind the Fine Print (cont.)
Contributed by Kris Olds
I'm glad I paid attention in math class. Credit card APR's call for a bit of number savvy.
An APR isn't an abstract number. It directly affects the amount of money that a consumer pays a credit card company. But how does that work? Let's say that a consumer purchases exactly one hundred dollars worth of goods in a month. With an eighteen percent APR, the balance at the end of the month would be one hundred one dollars and fifty cents. How does that relate to eighteen percent? Well, as stated above, APR stands for ANNUAL percentage rate.
Meaning that over a year, the consumer will pay eighteen percent. With twelve months in a year, a consumer will pay one and a half percent each month. Eighteen divided by twelve equals one and a half. So for every one hundred dollars that a consumer spends, he'll have an additional one dollar and fifty cents added to his total. If the consumer doesn't pay off his balance on a monthly basis, the numbers quickly add up. The APR is a great tool to use for shopping for credit cards. Having the right facts will help a consumer make the best, and most financially healthy, decision for his world.
