Credit Cards

Does your credit card APR matter?

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A low APR could matter a lot, but only under certain circumstances.

Key points

  • APR stands for “Annual Percentage Rate” and refers to the finance charges and fees you’ll need to pay with a credit card.
  • Credit card APRs can vary dramatically from one credit card to another.
  • Some cardholders should care about the APR, but for others it doesn’t matter.

There are many credit cards available for consumers to choose from. And there are many features to consider when choosing which card is the right one. These features could include perks for cardholders such as airline lounge access or car rental insurance. Or it could be the rewards program the card offers and the different spending categories that help cardholders earn extra bonus points, miles or cash back.

All of these different features are important, but there is one feature of a credit card that sometimes matters a lot, and sometimes doesn’t matter at all. It is the APR of the card.

What is a credit card APR?

APR stands for Annual Percentage Rate. It is the cost of the loan, including fees and finance charges. And it is expressed as a percentage, such as 17% APR or 20% APR.

The annual percentage rate can vary dramatically from one credit card to another. Some cards offer a 0% introductory APR on purchases over a set period of time, such as 12 months, which would mean the cardholder would not pay any interest on purchases made during the first year. Others advertise that they have a consistently low APR, while others charge a very high APR and don’t offer any special discounts for new card members.

You can find out the APR for any credit card by looking at the card’s terms and conditions. Just keep in mind that the APR could change over time, as most credit cards have variable interest rates, so finance charges aren’t locked in.

Does the APR of the card matter?

Credit cards are notorious for charging a lot of interest, and the specific amount you pay to borrow can be very important. That’s because interest costs on credit cards can be so high that they override any benefits a card offers, such as rewards or perks for cardholders.

However, you should focus on a credit card’s APR as a key feature in only one situation: if you plan to carry a balance on your card. Carrying a balance means that you don’t pay your card in full when the statement arrives, but instead pay the minimum payment or some other amount that is less than the total due.

If you don’t pay your balance, that’s when interest begins to accrue. And in these situations, you start to suffer from high finance charges that dwarf the value of any rewards or other benefits the card offers. The higher your balance and the longer you go without paying the card in full, the more these finance charges will cost you and the more important your card’s APR will be in terms of your finances.

However, if you pay your balance in full, then the card’s APR doesn’t matter at all. You won’t pay interest, so you shouldn’t care what your interest rate is, as it won’t affect you.

As long as you’re sure you’re not going to charge more than you can afford each month, you don’t need to look at the APR and can instead make your decision about which credit card to apply for based on other factors. .

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