When Does the APR Apply to a Credit Card Balance?

By Susan Sosbe

  • Overview

    When Does the APR Apply to a Credit Card Balance?
    APR is the annual percentage rate, or interest on a credit card. All credit cards have an APR, even if it's zero. This is basically the extra amount of money that you will pay on a credit card over the course of the loan. The APR will come into effect if the balance is not paid in full after the first billing cycle, which is usually a month after the start of the loan.
  • Types

    There are two types of APR when applied to a credit card. The first type is a fixed APR. This means that the percentage rate that is given at the start of the loan will be the percentage rate that stays in effect for the course of the loan, as long as your payments are on time and there is no defaulting on the terms of the credit card. The second type of APR is a variable APR. A variable APR is exactly as it sounds. The APR may fluctuate throughout the course of the loan. A variable rate usually has a base rate, which means that it will never go below that base, but it may go higher.
  • Considerations

    Some things to keep in mind for APRs is that your credit will affect what kind of APR you will receive for a credit card. If you have a good credit history, you have a good chance of receiving a low APR. This means that you will pay less extras on the credit card over the course of the loan. If you have bad credit or no credit history, you will probably have to deal with higher APRs.


  • Prevention/Solution

    To avoid paying a high APR, keep your credit history in good standing. To avoid paying an APR altogether, pay off the balance of the credit card within the first month. Also, try to avoid charging more than you can afford to pay.
  • Warning

    Whenever you apply for a credit card, always read the fine print and all of the terms that are offered on the credit card. There are often terms that will affect the APR, even if you start out with a fixed APR. For instance, if you default on a payment or pay late, this will cause the APR to go higher. Cash advances on credit cards also tend to carry a higher APR. With credit cards, make sure the low APR that you are seeing is not only an introductory rate. Credit card companies will often offer a low introductory rate to entice you, only to raise the APR to a higher rate after a period of a few months to a year.
  • Significance

    Depending on your APR, how much you borrow and the duration or how soon you pay off the remaining balance of the credit card, you may end up paying a lot of extra money. APRs exist to help compensate the lender for inflation and the risk involved in lending to the borrower. This is why good credit is important to the borrower. Good credit shows that you are less of a risk to the lender, and the borrower will be compensated with a lower APR.
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