What is the meaning of APR? The abbreviation APR stands for Annual Percentage Rate. It is the yearly costs that you must incur on your credit card for using it to borrow money. In other words, it is the amount you pay as a fee to extend your credit period for repaying transactions made on your credit card.
The credit card APR for purchases and the rate of interest charged on a credit card is the same. Both are fees that are calculated on a yearly basis against the transactions made on the card. However, a typical credit card APR for purchases, may not be the only APR that is charged on your bill. Depending on credit card features, usage and repayments, other types of APRs can also be applied against your credit card.
Here is a list of the different types of credit card APRs that can be charged on your credit card.
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.
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 Such an APR is applied against the total amount withdrawn as cash and is calculated on a daily basis.
Failing to clear the minimum dues for more than two months, can attract a penalty APR. Such a charge is usually higher than other interest rates.
A balance transfer APR is the special interest rate which is charged on balances that are moved from one card to another in an attempt to pay off credit card debt at low interest charges.
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 balance transfers, or both, for a specific period of time.
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, lower is the APR that you are likely to be charged.
Here are some ways in which you can enjoy a better APR.
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.
Avail balance transfer- If you have multiple credit cards, you can transfer the balance to the card that has 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.
Display a 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.
A good credit card APR is an APR which is below the average interest rate available currently. The better the credit score, the better are the chances to get a good APR for a credit card.
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.
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 is the APR that you are likely to be charged.