Most of us Americans have held at least some credit cards at one time or another. They offer a purchasing convenience we have not always had as a consumer. They give us the ability to purchase items without any cash to our name. However, most of us credit cardholders donât understand everything having to do with credit cards including the definition of APR. So Iâll do my best to answer the question of "What is Credit Card APR?"
APR is an acronym for annual percentage rate. It basically is the yearly rate of interest on balances from consumer charges, cash advances or transfers from other credit card balances. However, each of these various balances can and usually hold different APR values.
There are also two types of APR values including fixed and variable rates. The fixed rates donât change or donât change frequently. In other words, they donât change as frequently as the variable rate but they can change. When they do change, the credit card company has to inform their consumers of this.
A variable rate APR values will change more frequently and without needed announcements of the change. This variable rate will likely be connected to another interest rate like the treasury bill rate or the Prime rate. So if the connected to rate changes, then your variable credit card rate will likely change also. If you do get one of these cards, it will be necessary to read all the information including those detailed APR information that discusses how the rate will change.
Most credit cards will have multiple APR values as stated above. We will briefly talk about each one of them as stated below.
One APR value will be for purchases made, another for balance transfers and then the other one for cash advances. In this case, the rates given for advances in cash along with the balance transfers will usually be larger than the one that will be given for purchases or consumer spending.
Introductory APR values are ones that the credit card company gives in the beginning of your credit card account. These are rates given for various reasons including enticing you to apply for the credit card.
Sometimes a penalty APR will be applied when you donât make your payments on time. For example if you make your payments late maybe two times within six months but then the credit card company may have within their agreement with you the ability to apply this penalty rate.
Tiered APR values are rates that get connected for various levels of outstanding balances on credit cards. You may pay a lower interest rate on balances which are low and higher interest rate on higher balances. For example you may only pay 14% on balances up to $500 and 16% on balances over $500.
A delayed APR value will be a rate only applied some time in the future. Sometimes credit card companies will entice consumers to apply for their credit cards by offering 0% APR initially but then have the actual APR later starting in a particular month. An introductory rate will usually be used more often than they delayed rate.