What is Credit Card APR

What is Credit Card APR

What is Credit Card APR
What is Credit Card APR

APR means “annual percentage rate” and it is the cost borne by the borrower of the loan or any credit facility every year. What is Credit Card APR when we talk about Credit Cards it is the outstanding amount every month which is not paid in full. Credit Card APR varies from issuer to issuer, type of Credit Card, borrower credit score, percentage of usage etc.

APR is of two types broadly fixed APR and variable APR, Variable means it changes from time to time as per the conditions of the financial market.

Important things to know are that credit Card APRs variability also depend on fees charged on the issue of credit Card, balance transfer fees, over limit fees, late payment fees, annual fees, so it is very crucial to understand terms and conditions associated with Credit Card while applying for a new Credit Card.

What is the formula for calculating APR 

APR can be calculated using the formula below

Number of days counted from the day of transaction x interest rate x outstanding amt. X 12/365

Example: transaction date-1Aug.2023,amount-11000,statement date 6aug2023,minimum amt. due 5%-550,due date-27aug23, monthly interest rate-3%partial payment of 6000 on 21aug23

Calculation- 1 APR=rs11000 x 22 days x 3% x 12 months /365=238.68

calculation – 2 APR=rs5000 x 17 days x 3% x 12 months /365 =83.83

Now APR = 238.68+83.83= 322.51

Here are the types of APR

Credit card holders ought to know that Credit Cards frequently have various APRs. For instance, you might have one APR for purchases, an alternate APR for balance moves, and one more for loans. When in doubt, Credit Card organizations will generally charge a higher APR for loans in light of the fact that — in contrast to buys — there’s no effortlessness period, meaning the premium starts building when you pull out the cash.

Knowing the contrast between starting and ordinary APRs is additionally significant. Many Credit Card guarantors offer basic or special rates when you open another Mastercard account. (For example, there might be a 0% initial rate on buys and balance moves for the initial year.) When the early-on period closes, the standard APR would apply to any remaining equilibrium on the card.

At last, there’s one final APR to consider: punishment APR, which is a higher rate that is forced when you default on your card by missing at least two regularly scheduled instalments. Contingent upon the card backer, you might need to make a specific number of on-time instalments before the punishment APR can be decreased to a lower rate. (Setting up repeating instalments or instalment-ready updates can assist with guaranteeing your instalments are made on time.)

There mainly two types of Credit Card APR  Fixed APR and Variable APR

Fixed APR –

Fixed APR means APR will be fixed for the whole lifetime of the card offered. Monthly payments for such cards will be the same. Fixed APR critically depends upon issuer terms and conditions, borrower’s creditworthiness, market conditions and many other things.

Variable APR –

Variable APR means that changes or varies as per the market conditions changes which is the prime lending rate. Prime lending rate may change monthly, quarterly or yearly APR will automatically adjust accordingly. Simultaneously you can not predict monthly premiums that will also vary because as interest will change monthly emis or premiums will also fluctuate.

Can someone reduce his APR 

Here are some steps or strategies which help to reduce APR 

  • The very first strategy is to improve your credit score because the lower the credit score the APR and vice versa. can improve your credit score by paying your monthly bills in full and within time. And it depends upon how much limit you had used monthly. If you use more than 70% of the sanction limit then it has a bad impact on your credit score. Also, make sure that your credit score is free of any errors. Improve your credit score. Higher credit score leads to lower APR deals.
  • Negotiation with the issuer is also one of the ways if you have a very good repayment history and good credit score you can negotiate with the issuer to reduce the APR.
  • You can consider a balance transfer option if your credit score is good and your repayment history is also good then you can choose any other issuer or bank which has a lower APR. In the balance transfer case must know all the terms and conditions and the transfer fee before opting for any other issuer or bank.
  • Paying your monthly bills in full maintains a lower APR because it will not lead to any over-limit fee or any other finance charges in the account.
  • If all the earlier steps do not work you may consider a new card with better APR, annual charges, liberal points or rewards, and lower interest rates, but before applying for a new credit card compare with the existing card its terms and conditions, joining fee, and other charges. Because you should not go after flashy deals..


APR is the annual percentage rate which is levied on a monthly balance which is not paid by the user. APR rate depends on paying history, creditworthiness, usage,cash advances, and penalty. Good credit score, timely payments, full monthly payments, utilisation up to 70% maintains good APR. Not paying monthly bills in full every time and not timely , utilisation of more than 70% of the sanctioned limit leads to higher APR.


What is APR?

APR is the total of interest,fees and charges levied on any credit facility or loan on an annual basis.

What is the difference between APR and interest rate?

Interest rate is the rate or cost you have to pay on any loan or credit facility used by the borrower. While on the other hand APR is the total cost interest + fees + any other charges borne by the borrower annually.

How is APR calculated?

You can calculate it by multiplying the total amount borrowed * interest rate * months used  / 365 days. Different lenders calculate it in different terms so you should read terms and conditions before taking such a facility.

What factors decide APR?

APR depends on credit score, limit borrowed by the borrower, current market conditions, fees and other charges belonging to the loan or credit card.


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