Apr credit cards
When used properly a credit card can serve to be one of the best financial tools. However not everyone can afford to have a credit card that carries high interest. Every credit card has its annual rate knows as the apr. Let us understand what is an apr and how is it applied on a credit card.
What is apr credit card
apr is basically the cost of the credit as the yearly interest rate; it stands for Annual Percentage Rate and is used for comparing different credit card offers. The apr on the credit card is calculated on monthly basis on the present billed amount of the month. The monthly interest on the credit card is calculated in a way so that it remains the same throughout the year. The interest on the amount over the year (apr ) is calculated and divided by 12 to give the monthly interest rate.
The apr credit cards vary based on several reasons. If you have good credit then you would probably offers a credit card with low apr. If you are applying for a credit card for the first time and you have credit problems then your apr would be higher than the usual apr credit cards.
The apr credit cards are calculated separately on each credit card and hence it is important that you read the terms carefully before you plunge into any offer. There are some companies that can change your fixed apr with prior notice. There are other cards that have variable apr, which means that the interest on these cards would change with the varying interest rates in the market. Usually the variable apr credit cards have rates that are prime rate plus 3.
How does the apr credit card affect your bill
If you are unable to pay your credit card bill in full every month then the apr credit cards can have a great effect on your bill. Let us understand this with an example. Suppose that you are charged $1,500 on your credit card and your minimum payment towards the card is $30, which seems to be good enough to meet the payment. However if you are charged 15% apr on the credit card then it would take you ideally six years to meet the entire payment with additional interest on it. This would make your $1,000 to turn into $2,000 by the time you make the payment.
In case you are suffering from credit problems and are not regular in meeting your payments then you would as it is be charged higher apr and this can lead to your charged amount to turn more than double to be paid back to the credit card company.
The hidden apr credit card rates
Understanding the cost of apr credit cards is very important.Even if you qualify for low apr credit cards it is important that you understand the cost thoroughly and then apply for the card. Understand till when is the present apr on your credit card applicable and what will be the rate after the offer expires.
Also understand well before hand the cost on the credit card in case of default. This is when you fail to make your payment on time then the credit card company would charge you a penalty on the total amount that is pending to be paid. Make sure that you are aware of this cost.
In case you are making cash advances on the credit card then make sure that you know the apr for cash advances. At times this can be high than what the company would have quoted. It is important that before you sign up for any credit card offer you should make sure you take a print of the terms and go through it carefully so that you know what you are singing up for.
Things to know about apr credit cards types
The apr credit cards are of different types and it is highly important to understand these types in detail. Let us see these different types of apr credit cards.
- Introductory apr: This is the apr according to which you will be charged in the beginning when you take a credit card. Usually credit card companies offer introductory apr of 0% on purchases and balance transfers for the first 6-12 months. However, this is not true for the entire period of the credit card. Once this period gets over then you would be charged apr depending on the offer presented from the company.
- Delayed apr: This is the apr that sets in after the introductory apr offer has expired. If you wish to have the credit card more than a year then you should take a serious look into this delayed apr. This is one of the ways the credit card companies earn money.
- Penalty apr: In case you are not prompt in making your credit card payment then you are charged penalty apr. If you miss a payment the credit card company charges you with penalty apr. Usually credit card companies charge high dollars on the penalty apr. Apart from this you would also have to pay in late fee for the missed or delayed payment. So before you go in for any credit card offer, make sure that you are aware of the penalty apr and the late fee.
- Tiered apr: If there are any outstanding balances on your credit card then there are some companies that charge tiered apr which means they charge different apr for different balances. E.g.: if your outstanding balance is between $0-$1,000 then you would be charged an apr of 17% and if it is above $1,000 then you would be charged an apr of 19-20% depending on the amount outstanding balance.
Now that you have understood apr credit cards it is important that you take your decision after understanding all the terms and conditions so that you would know your costs better.
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