What It Means
APR stands for Annual Percentage Rate and represents the true yearly cost of borrowing money. Unlike a simple interest rate, APR includes additional fees and charges, making it a more comprehensive measure of borrowing costs. Credit cards typically have variable APRs that change with the prime rate. Most credit cards have APRs ranging from 15% to 30%, depending on your creditworthiness. Understanding APR is essential for comparing credit card offers and calculating the real cost of carrying a balance. If you pay your balance in full each month, APR becomes irrelevant because you avoid interest entirely during the grace period.
Frequently Asked Questions
What is a good APR for a credit card?
A good APR depends on your credit score. Excellent credit (750+) typically qualifies for APRs between 15-18%. Average credit may see APRs of 20-25%. Any APR below the national average (currently around 22%) is considered competitive.
Is APR the same as interest rate?
Not exactly. APR includes the interest rate plus any additional fees, making it a more complete picture of borrowing costs. For credit cards, APR and interest rate are often used interchangeably since most card fees are separate.