Credit Cards, Interest Rates and APRs: Everything You Need to Know

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Annual percentage rate is the rate at which your credit card balance accrues interest.

There are different types of APRs – depending on the key in of transaction.

Here’s an overview:

In fact, APR represents the interest rate combined with other financing fees.

Other fees, such asannual feesandbalance transfer fees, are charged separately from the APR.

A fixed-rate credit card has the same APR the entire time you hold the card.

Instead, look to credit unions and local banks, which are more likely to offer fixed-rate cards.

Your credit card issues a monthly bill at the end of each statement period.

For example, with an APR of 20%, your daily periodic rate could be .05479%.

According to a 2023 Experian report, theaverage credit card balanceis around $5,910.

And remember, that’s only ifyou didn’t make any new purchases while you paid down the balance.

“Credit cards should only be used for things you already have the money for,” Nicole said.

“This way, you’re guaranteed to never pay interest.

Once you borrow money for a purchase, pay in full on the due date.

No balance is carried over and no extra fees are being paid.”

In general, the best APRs are reserved for those with high credit scores.

For borrowers with lower scores, the average rate can climb much higher to 29.99% or more.

First published on Aug. 18, 2021 at 4:00 a.m. PT.