Credit Card APR

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What is Credit Card APR

APR stands for Annual percentage rate, is the credit card interest rate on a credit card that is stated as a yearly rate, it is then called. Charged every month, interest rate typically is calculated everyday. You don’t really pay the ‘annual’ rate because if you did that, you would have to bear with a lot of late fees piled up on top of the balance and interest. 


Clear the outstanding dues within time and in full every month so that you can easily avoid paying the Credit Card APR.

Difference Between Credit Card APR and Interest Rate

Credit card interest rate is the amount that is charged on your credit card for borrowing from the available credit card limit and failing to repay it within the due date. It is also known as the finance charge. When the interest rate is expressed annually instead of monthly it is known as the credit card APR. In some cases, however, APR may include not just the credit card interest rate, but also other additional costs/charges associated with availing a loan on the card. These may include broker fees, rebates, closing costs, etc. As a result, APR is a more effective means of comparing credit card loans.

To understand this better, here is a table with the credit card APR and interest rate for some of the top credit cards in India.

Fixed APR vs. Variable APR

Fixed APR

Variable APR

Fixed APR of a credit card means that the interest rate on the amount you borrow, will not change throughout the repayment tenor.

 Variable APR changes during the repayment period with the wavering in the index interest rate. 

It does not fluctuate with the changes in the index.

These changes usually occur on a monthly or quarterly basis, as per the prevalent economic conditions.

Types of Credit Card APR 

Here is a list of the different types of credit card APRs that can be charged on your credit card.

1. Purchase APR

The purchase APR is the most common type of APR which you are likely to be charged on your card. The interest charge is calculated on the purchase amount and is levied for seeking an extension of your credit period.

2. Cash Advance APR

Using your credit card at an ATM to withdraw money attracts a different APR known as the Cash Advance APR. Such an APR is applied against the total amount withdrawn as cash and is calculated daily.

3. Penalty APR

Failing to clear the minimum dues for more than two months can attract a penalty APR. Such a charge is usually higher than other credit card interest rates.

4. Balance transfer APR

A balance transfer APR is the special interest rate that is charged on balances that are moved from one card to another to pay off credit card debt at low-interest charges.

5. Introductory APR

This is a special rate that can be offered temporarily as a perk by your credit card issuing company for signing up for a type of credit card. The value of such an introductory APR can be as low as 0% and can be valid on either purchases or credit card balance transfers, or both, for a specific period.

How is APR Calculated for Credit Cards

There are different APRs that are charged on a credit card. A credit card issuer factors in several parameters to decide on the APR to be charged. Of these factors, creditworthiness decided by your credit score is a key factor in determining the APR you qualify for. Usually, the better the credit score, the lower is the APR that you are likely to be charged.

Tips on How to Get a Credit Card with Low APR

Here are some ways in which you can enjoy a better APR:

1. Maintaining a Good Credit Score: 

If you own a credit card, make sure to maintain a good credit score on the existing card. This will allow you to get a good credit card APR on the next card you apply for.

2. Avail Balance Transfer:

If you have multiple credit cards, you can transfer the balance to the card that has a low APR. This will allow you to enjoy lower interest values on your credit card debt. As a result, you will be able to clear your dues faster and can improve your credit score.

3. Display Good Repayment Behaviour: 

If you are making only minimum payments against your credit card dues, the extended credit on your card will be charged APR. However, if you carry out your credit card bill payments in full every month before the due date you can prevent yourself from being charged on the APR.

FAQs about Credit Card APR

  • ✔️How much is the penalty APR?

    Additional interest rate is charged on credit card payments that a holder has missed for 2 months in a row. So, if the rate of interest charged every month is 3.50%, the APR (Annual Percentage Rate) will be 42%.

  • ✔️How can I reduce APR?

    Making timely payments and clearing credit card dues on or before time is one of the best ways to ensure that you can avail a reduced APR.

  • ✔️How much APR is too much?

    Penalty APRs can sometimes even reach as high as 29.99% if the payment deadline has been crossed for two months i.e., 60 days or more.

  • ✔️Does APR matter if you pay on time?

     If you make timely payments on a monthly basis, then a high APR may not be your worry. Often, cards with higher APR have better perks and benefit programs. If you are a consistent card user who makes timely payments then it won’t matter whether it’s a high or low APR as your credit profile will not be affected.

  • ✔️Why is my APR so high on my credit card?

    Often cardholders need to take a quick look at their credit score from time to time. Lesser your credit score, more are the chances of your APR being on the higher end.

  • ✔️What is a good APR for a Credit Card?

    A good credit card APR is one that is below the average interest rate available currently. The better the credit score, the better are the chances to get the best deals on APR for a credit card.

  • ✔️What is the difference between interest rate and credit card APR?

    Purchase APR and interest rate is the same. It is a value that is calculated yearly. Apart from purchase APR, there are other credit card APR rates depending on the card type and its use. These include- cash advance APR, penalty APR, introductory APR and balance transfer APR. In some cases, however, APR may include not just the credit card interest rate but also other additional costs and fees of availing a loan on the card. These costs/ fees may include broker fees, rebates, closing costs, etc.

  • ✔️How is APR charged?

    A credit card issuer factors in several parameters to decide the purchase APR that is to be charged. Of these factors, creditworthiness, indicated by your credit score, is a key factor in determining the APR you qualify for. Usually, the better the credit score, lower the APR that you are likely to be charged.

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