Credit Card Aprs : the Numbers Behind the Fine Print
Contributed by Kris Olds
A credit card's APR is more than just little number
The APR, annual percentage rate, of a credit card is more than just a random number assigned to a card. It is the amount a consumer will pay over a year if they carry a balance from month-to-month. Credit cards companies can use APR's as marketing tools. For example, a credit card company may offer a credit card with a zero percent APR for the first six months of an account. That would mean that the for the first six months, there would be no interest charged to that account. What a deal!
Before a consumer goes crazy and signs up for all the zero percent cards that are available, it's important to read the fine print. With an offer such as a low introductory APR, there is usually a catch. After the initial six month offer, the APR may jump up to between fifteen and twenty percent, sometimes higher. So if a consumer is going to take part in such a great deal, it's important to make sure that purchases made during that time are paid off by the end of the special rate.
Otherwise it's not a deal at all.
I'm looking at my credit card statement and I see all sorts of numbers, including APR. What do they all mean?
APR stands for annual percentage rate. In laymen's terms, this means how much it will cost a consumer to use a credit card over a year. Different functions of the credit cards will have different APR's, including purchases, cash advances and balance transfers. Some credit cards also increase the APR if there are late payments on a credit card. So on one credit card bill, there could be three different APR's listed.
