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How Does APR Work With Credit Cards and When Does it Matter?

How Does APR Work on a Credit Card and When Does it Matter?
Fiona Staff1/16/2020

At its core, an APR (annual percentage rate) is the cost of borrowing money. With a personal loan, this includes interest as well as additional costs and fees. With credit cards, however, an APR works a little differently. Below is an outline of what an APR is, how the percentage rate is determined and why it matters when looking for a credit card to suit your individual needs.


The lower the APR, the better. Fiona matches customers with pre-qualified credit cards to help find the best rates available.

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What is an APR and How is the Amount Determined?

As stated above, personal loan APRs are all encompassing, including interest plus additional costs and fees. With credit cards, however, there is no real difference between the APR and interest rate. The reason being, it’s impossible to predict what kind of fees an individual cardholder will incur on an annual basis. As a result, credit card companies do not consider any additional fees or charges when determining how the APR affects an account balance. If a customer pays their monthly bill on time, they will never have to deal with the APR, aka, paying interest.

Still, credit card companies all have to set an APR, which is determined by something called the prime rate. This is the rate lenders offer their most creditworthy customers. The prime rate is set in relation to the federal interest rate. As a result, the average credit card APR fluctuates over time. This is why most credit cards carry variable interest rates that can change, while a select few cards offer a fixed interest rate, which is not affected by the altering federal interest rate. 

When applying for a new credit card, a person’s individual APR will be set in relation to their credit score. The better the score, the lower the APR is likely to be and vice versa.

It’s important to note that credit cards can carry multiple APRs for different card uses. Beyond failing to pay off a statement balance on time, a cardholder can also be charged an APR for balance transfers and cash advances. There is also a higher penalty APR that is applied when an outstanding balance elapses a certain time period. 

The Benefits of Introductory APRs

The good news is certain card providers offer favorable introductory APRs. These offers can last up to 14 months, and include low or 0% APR on transactions, balance transfers and cash advances. As long as cardholders pay off their minimum monthly balance, they will be eligible for introductory APRs for the duration of the offer period. 

Applying for a card with an introductory APR offer can have many benefits. For example, a cardholder can make a big purchase and spread out the payments over the offer period to reduce or avoid interest fees. Regarding balance transfers, a person can transfer high-interest credit debt from another card to their new card, and pay off the balance at lower to zero interest. 


To get matched with credit cards offering introductory APRs, try Fiona. 

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Just remember, any unpaid credit card debt after the introductory period is over will be subject to APR charges. Additionally, terms vary from card to card, including when a user can perform a balance transfer at the introductory APR, so make sure to read all of the fine print in the terms and conditions. 

Bottom Line

While a credit card APR may not be important to someone who pays their bill on time, there are several instances where a cardholder will need to stay vigilant on terms and special offers. Finding the right card with a financial search engine like Fiona will make the process easier and friendlier.


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