# How Does APR Work on Credit Cards?

If you’re new to credit cards, you may be wondering how APR works. This guide will explain everything you need to know about APR on credit cards, including how it’s calculated and what it means for your payments.

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## What is APR?

The annual percentage rate (APR) on a credit card is the interest rate you pay on balances you carry from month to month. You can also think of it as the price you pay for borrowing money.

For example, if you have a credit card with an APR of 15%, that means you would have to pay \$15 in interest for every \$100 you borrowed.

APR is expressed as a percentage and it’s usually a higher number than your card’s stated interest rate. That’s because APR includes not only the interest rate on your purchases, but also fees charged by the issuer, such as annual fees and any charges for making a late payment or going over your credit limit.

## How is APR Calculated?

APR is calculated by taking the average daily balance of your account, including interest and fees, and multiplying it by the APR rate, which is an annual percentage rate. This calculation is then divided by 365 to get the daily periodic rate. The daily periodic rate is applied to each day’s balance in your account, and the interest is added to your balance every month.

There are a few things to keep in mind when calculating APR:
-The APR only applies to new purchases and cash advances; it does not apply to balance transfers or other transactions.
-The APR may be different for each type of transaction (purchases, cash advances, etc.), so be sure to check with your credit card issuer for specifics.
-The APR may also be different for different types of cards (e.g., rewards cards vs. business cards), so be sure to compare rates before you apply for a new card.

## How Does APR Affect My Credit Card Payments?

The interest rate (APR) on your credit card is the cost of borrowing money expressed as a percentage of the amount you owe. It’s important to understand how APR works because it can have a big impact on your credit card bill.

Here’s an example: let’s say you have a credit card with a \$1,000 balance and an APR of 18%. If you make no new charges and pay the minimum amount due each month (\$25 in this example), it will take you four years to pay off the balance. During that time, you will pay \$463 in interest charges.

Now let’s say you make the same \$1,000 purchase but this time you pay \$50 per month. It will take you 21 months to pay off the balance and you will pay \$153 in interest charges. By paying more each month, you save yourself almost \$310 in interest charges and two years of payments.

It’s important to remember that your APR is just one factor to consider when choosing a credit card. Other factors, such as annual fees, reward programs and grace periods, can also affect your decision.

## What is a Good APR?

APR, or annual percentage rate, is the interest rate you’ll pay on your credit card balance if you don’t pay it off in full each month. APR is a combination of two things: the interest rate charged on your account and any additional fees associated with borrowing money.

The ideal APR is 0%, meaning you wouldn’t have to pay any interest on your credit card debt. However, most credit cards come with an APR between 10% and 25%. The average APR for all credit cards is about 16%, according to the Federal Reserve.

If you carry a balance on your credit card from month to month, you’ll end up paying interest on that balance. The amount of interest you pay will depend on your APR, your balances and how long you carry that debt.

The best way to avoid paying interest is to pay your entire balance each month before the grace period expires. Most grace periods are 21 days long, which means you have 21 days after the close of each billing period to pay your bill in full before interest begins accruing.

## How to Get a Lower APR

There are a few things you can do to get a lower APR on your credit card.

First, you can try to negotiate with your credit card company. This is especially effective if you have been a good customer and have always paid your bills on time. You can also try to transfer your balance to a card with a lower APR.

Another option is to get a personal loan from a bank or credit union. Personal loans often have lower APRs than credit cards. You will need to have good credit to qualify for a personal loan, but it may be worth it if you can get a lower interest rate.

Finally, you can consider using a home equity loan or line of credit to pay off your credit card debt. These loans often have very low APRs, but they are secured loans, which means they are backed by your home. This means that if you default on the loan, you could lose your home.