Credit Card Guide

What is a Credit Card APR?

24 July 2010 by CreditCardsCo™

Credit cards are known to have a number of different terms associated with them. Each particular terminology is known to mean and stand for something that is quite important to your over all agreement. One question that tends to pop up quite often is in regards to what a credit card APR is? As I'm sure many of you are already aware, a credit card is like a temporary loan which allows you to buy products and services on credit. Depending on which credit card you have applied for, you are given a certain credit limit which is based on a monthly amount. How much your credit limit will be is solely based on your previous credit history rating. Even though you are given a limit which you can spend up to, what most people tend to forget is that you have to repay the money back.

The repayment that you are expected to make is always inclusive of interest. This is where the concept of APR comes into play. APR stands for annual percentage rate. It is an annual amount of interest that you are expected to pay on your outstanding dues. Obviously, things that you purchase in January for argument sake will be paid for well before the year ends. In such a case, one is required to apply a formula by dividing how many days the credit was taken for by 365 days in a year and multiplying that final amount by the APR. This will give you the interest amount that you will be expected to repay back on your capital amount. The way I have showed to calculate your APR here can vary quite significantly depending on which credit card company you decide to opt for.

For this very reason, it is important that you read the fine print agreement of any credit card policy before making any commitment. By federal law, all credit card companies are required to state all the legal requirements in their terms and conditions including how the amounts are calculated. If you feel that you have taken the time to read over the fine print agreement but still have not been able to understand what exactly the details mean, it is a good idea to get some form of professional advice. This could be in the form of visiting a financial advisor or getting advice from a lawyer.

When deciding on which credit card to opt for, it is important that you take a bit of time to research the market. Seeing as there is a lot of competition in regards to credit card applications, you are bound to find a number of credit card companies that are offering low APR rates as an attractive buying bargain. In most cases, credit card companies that offer extremely low APR rates are known to have some form of catch in their clause that you have to be on the look out for. The key lies in taking your time to do the research before committing your self to any particular credit card company.

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