Understanding APR(Annual percente rate)

What’s this thing called APR which is oft quoted especially for credit cards? APR means the “annual percentage rate”. APR prescribes the interest rate you will be paying if you have a carry over balance. The credit card APR which may be different depending on the credit card transaction.

Multiple APRs

One credit card having different APRs for different transacations eg.one APR for purchases, one different APR for cash advances. In most instances, the APR for cash advances and balance transfers are higher than the APR for purchases.

Tiered APRs

This is where different rates are applied to different levels of outstanding balance. Usually, it can be higher APR for lower amount outstanding and lower APR for higher amount outstanding or vice versa.

Penalty APR

You are slapped with an APR increase if you are late in payments.

Introductory APR

You get an introductory APR for a limited period and usually, the introductory APR applies for new cards. Upon expiry of the limited period, the APR reverts to the conventional APR.

Delayed APR

This simply means that the APR is delayed until a period stipulated in the future. The future APR might not be known as yet.

Fixed vs. variable APR

With fixed rate APR, the APR is pretty much constant over the whole usage of the card unless there is a  clause which allows the credit card company to change it at their discretion and upon notice. Look out for this clause.

Variable rate APR changes from time to time dependent on the interest rate it is pegged to. This can be the prime rate or the Treasury bill rate. So, if the other rate changes, your APR will also move in tandem whether it be upwards or downwards.

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