APR of Credit Card
What is APR?
APR stands for "annual percentage rate". It is the rate of
interest you will pay if you carry over a balance from month to month,
transfer a balance from another credit card, or take out a cash advance.
The Annual Percentage Rate or APR states the interest rate as a yearly
rate. A credit card may have several different APRs depending on how
you use it, for purchases, cash advances, carry a balance, an introductory
(promotional) rate, or have a transferred balance.
Types of APR
Fixed APR
Fixed rate credit cards have an APR that doesn’t change, or not often.
The APR on a fixed rate credit card can change over time, but the credit
card company is required inform you before increasing the fixed APR.
Variable APR
A variable rate cedit card has an APR that changes periodically. The
interest rate is usually tied to the prime interest rate, Federal funds
or the Treasury bill rate. If the rate changes, the rate on your card
may also change. Read the fine print on the credit card application
and in the credit card agreement to see how often your card’s APR may
possibly change. The terms and conditions for using your credit card
will define what will cause the rate to change.
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Possible Various APRs
Introductory APR - A promotional rate will apply when you open the
account and usually last 3, 6, 9 or 12 months.The rate will go up to
the normal rate after the introductory rate expires.
Delayed APR - A promotion that will give you 0% APR for a specific
time frame. Take note of the APR that will go into effect after the
promotional period to see your actual APR.
Purchases, balance transfers and cash advances - The APRs for cash
advances are often higher than the APR for purchases.
Tiered APR - Different rates are applied to different levels of the
outstanding balance (for example, 15% on balances of $1–$1000 and 18%
on balances above $1000).
Penalty APR - The APR may increase if payments are late. The terms
for this are usually in your credit card agreement.
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