Credit Card APR

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What is Credit Card APR

APR stands for annual percentage rate. It is the interest rate on a credit card that is stated as a yearly rate. Charged every month, but interest rate is typically calculated everyday. You don’t really pay the ‘annual’ rate. By doing so, you would have to bear with a lot of late fees piled up on 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.

Types of Credit Card APR 

You could be charged one of five different APRs while using a credit card:

1. Purchase APR

The purchase APR is the most typical type of APR connected to a credit card. This is the interest rate applied to any product you purchase which is not fully paid for before the end of the grace period. The grace period is the time in between the end of a billing cycle and the day that your bill is due.

2. Cash Advance APR

When you take money out of the credit limit on your credit card, this is known as a cash advance. The APR for cash advances is frequently much higher than the APR for purchases or balance transfers. Most cards don’t have a grace period. It is generally not recommended to opt for a cash advance unless it's an emergency. Hence, the cash you withdraw through your credit card will have to be repaid soon.

3. Penalty APR

Some cards will charge a penalty APR when you skip a payment or make a payment well beyond your due date. Along with an increased APR, you run the risk of losing any introductory offers. It also negatively impacts your credit score. Furthermore, if you frequently miss payments, the penalty APR may continue to apply to your account.

4. Balance Transfer APR

Any transferred balances from one card to another are subjected to APR. Unlike the purchase APR, there is no grace period for the balance transfer APR. If it is not paired with an introductory APR, it begins to accumulate interest on the day the transfer is made. It is typical for banks to impose the same APR for both purchases and balance transfers; however, you should always verify it from the card provider.

5. Introductory APR

Several credit cards offer introductory periods during which you can take advantage of a low or 0% APR. As long as you make the minimum payment each month, you can use these cards to carry a balance without paying interest for a set period.

For instance, you might obtain a credit card with introductory rates of 0% for 12 months on purchases made or 0% for 15 months on debt transfers. In that case, you won't be charged interest throughout that period. However, after the promotional period ends, any balance remaining on the card will start to accumulate interest at the usual purchase and balance transfer APR.

Be cautious! If you don't pay off your entire balance before the introductory period expires, some cards would charge you all the interest accumulated since the purchase or balance transfer date. This is often known as deferred interest.

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. 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 tenure.

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.

How is APR Calculated for Credit Cards

Heavy interests can be avoided if you are able to comprehend how the next APRs may take effect. Hence, it is useful to understand how APR is calculated.


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.


Here is a formula to figure out your typical purchase APR. Let’s assume there is a credit card with a variable APR of 20%, a 30-day billing cycle, and a daily balance of ₹1,000. This might help you figure out how much interest you'd pay if you didn't pay your complete bill.

  • Convert the Annual Rate of Interest to a Daily Rate 

Since credit card interest is computed daily, you must convert your APR to a daily rate by dividing it by 365. As an example, if APR is 20%, then  20% ÷ 365 x 100 will give you a daily interest rate. In this case, it is 0.054%.

  • Find out the Average Daily Balance 

You can accomplish this by multiplying the sum of the balances from each day by the overall number of days in every billing cycle. Afterward, multiply that sum by the overall number of days included in the billing cycle.


Your average daily balance would be ₹1,000, for instance, if you have a balance of ₹1,000 on each day of a billing cycle of 30 days.

  • Calculate Your Monthly Financial Charge

Divide the result by 365 days by multiplying your average daily balance by the annual percentage rate and the number of days in your payment cycle.

For instance, if you don't pay off the balance before the grace period expires, interest charges of ₹16.44 for one billing cycle will be charged to your balance and the minimum payment ((₹1,000 daily x 20% APR) ÷ 365) x 30-day billing cycle).

The interest will then be calculated again and added to your average daily balance each month until it reaches zero.

What is a Good APR for a Credit Card? 

A decent APR is one that is significantly below the average interest rate for all credit cards currently available. The types of credit profiles a card is intended for and the card's type affect the APRs. The typical credit card interest rate can be as low as 18% for a low interest credit card and about 24% for a secured credit card.


Cards with 0% introductory rates however, only provide them for a brief period, before a standard variable APR takes effect. In light of this, a credit card that continuously provides an APR that is below average is nevertheless regarded by most standards as "excellent".


It's also important to know that credit card interest rates are typically higher than the starting rates on numerous other financial products, such as personal loans. As a result, even people with excellent credit may be subjected to exorbitant rates. However, you should strive to stay away from cards that skew much over these averages.

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 accumulate interest. However, if you carry out your credit card bill payments in full every month before the due date you can prevent yourself from being levied with interest.

FAQs about Credit Card APR

  • ✔️How much is the penalty APR?

    If you don’t pay your credit card bill when it is due, you are subjected to the purchase APR. If you miss two payments in a row, a penalty APR is applied. An additional interest rate is charged on the amount due. The penalty varies among different card issuers.

  • ✔️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.