What does APR Mean?
APR, which stands for annual percentage rate, is an economic variable used to describe the current interest rate for a whole year. The APR is listed as a percentage and typically attached to a credit card to describe the additional payments (used to satisfy the individual’s interest obligation) that the borrower is forced to pay to for the use of credit.
The APR is a finance charge expressed as an annual rate and takes the form of two specific definitions: the nominal APR and the effective APR. The nominal APR is the simplified interest rate delivered as a yearly percentage while the effective APR is the compound interest rate, which includes a fixed fee.
The nominal APR is calculated as the rate delivered for a payment period multiplied by the number of payment periods in that specific year.
The APR is delivered as an annualized rate rather than the monthly fees or rates that are typically applied to mortgages or other long-term loans.
In regards to credit cards, the APR refers to the amount you will pay in interest per year. The APR on a credit card will fluctuate based on a number of factors and variables, the most critical of which is the holder’s credit history.
The APR is only attached to the remaining balance of a credit card. If the individual fails to pay the complete balance owed and opts instead to pay the minimum balance, the APR will be attached to the remaining balance and then carried over to the following month.
What is a 0 APR Credit Card?
Those lenders that issue 0 APR credit cards for a fixed timeframe typically do so for the borrower’s first year of use. After this time, the APR is adjusted based on the individual’s credit history and finances and is then attached to the remaining balance (if applicable) of the card.