APR mainly stands for the Annual Percentage Rate. So, it is basically the interest rate on your credit card referred to as an annual rate. You need to pay it to further carry the balance in your credit card. But, the credit card APR changes over time, meaning the rate can either go up or down. Hence, you have to clear all your outstanding dues every month to ignore paying the APR on your credit card. However, the article, here, will further discuss APR types, and the process to calculate it.

Type of Credit Card APR

The credit cardholders must be aware of the fact that there are different types of APR credit cards. Here are the categories:

Purchase APR

This APR is typically associated with purchases made on credit cards, where the interest you pay is based on the money you spend. Your purchase will be subject to an interest rate for groceries, clothing, entertainment, or other expenses.

Cash Advance APR

This APR is typically associated with purchases made on credit cards, where the interest you pay is based on the money you spend. Your purchase will be subject to an interest rate for groceries, clothing, entertainment, or other expenses.

Balance Transfer APR

Any balances transferred from one card to another will be subject to the APR. Unlike the purchase APR, there is no period for the balance transfer APR where interest does not accrue. The APR for purchases and balance transfer may be the same, but the card issuer should verify it before the transfer.

Penalty APR

If you make a payment late or miss a payment, you may be charged a penalty APR, which can eliminate any introductory offers you may have received. Additionally, this can impact your credit score and may even cause the penalty APR to remain on your account if you regularly miss payments.

The Calculation Process of Credit Card APR

Below is the process to calculate the credit card APR:

• The interest APR can be divided by 365 to yield a daily rate.
• Calculating the Average Daily Balance is the next step of the calculation. You need to divide the total of the balances from every statement and divide it by the number of days.
• To calculate the monthly finance charge, divide the annual percentage rate by 365 days by your average daily balance and the number of days in your payment cycle. You can easily check and calculate on the credit card app.

Tips to Maintain the Credit Card APR At Its Lowest Value

Here are some tips for maintaining the lowest possible APR credit card.

• Having a credit card makes it essential to maintain a good credit rating. It will improve your chances of obtaining a favorable Annual Percentage Rate (APR) when you apply for a new card.
• The balance will accumulate interest when you pay the minimum amount due on your credit card. Pay off the full balance before the due date to avoid being charged interest.
• If you possess multiple credit cards, you can transfer the balance to the one that offers a low annual percentage rate. Doing this can also help boost your credit score.

Conclusion

In conclusion, understanding your credit card APR and its different types is crucial to avoiding unnecessary charges and maintaining good credit health. Remember to always pay your balances in full and on time, and if you're looking for a credit card that offers great rewards, consider checking out the Fi Money credit card. Not only does it give you a 2% valueback through rewards, but you also get to earn Fi Coins, our very own reward system, and enjoy a range of travel perks. So go ahead and make informed financial decisions with the Fi credit card in hand!

Frequently Asked Questions

Is there any way to reduce the APR?

Clearing all the card dues and making the payments timely will help the cardholders to lower the APR. Also, you must have a good credit score and history to avoid paying the APR.

How much is the penalty APR?

Well, if you do not pay the outstanding dues for two months, your lender will impose a penalty APR. They will calculate it depending on the total outstanding.