When shopping for a credit card, one aspect that consumers look at is the annual percentage rate or the APR. APRs are not to be confused with interest rates. More often than not, when creditors mention interest rates, they mean the monthly interest that you need to pay each time your bill arrives. The APR includes the monthly interest rates, but it comes with the annual fees and other costs as well. Simply put, the APR is the real price of your credit line.
How the Interest is Obtained Using APR
Take a look at your credit statement. You will find that there are two interest rates in it. The first one is the monthly or the periodic interest rate while the other is the APR. Some banks use the periodic rate as the daily interest rates. If this is your case, it means that your creditor computes the interest daily instead of monthly. If you cannot find the monthly interest rate, you only need to divide the APR by 12, signifying the number of months in a year.
Knowing your interest rate will help you determine the manner and the schedule of your debt repayment. It will be much easier to calculate or put up a budget for your finance charges. You can multiply your periodic interest rate by the whole account balance to know your next monthly charge.
Things to Note about APRs
There is no doubt that it is a smart move to go for cards that have low APR. Unfortunately the application and the approval process are not that simple. There are many other considerations that creditors take a look at, including the person’s credit history and payment record. What makes this even more confusing is that there may be varying APRs on a single credit card.
If you only use your credit card to purchase goods, you will only be given one APR. However, if you use your card to transfer balances and withdraw cash, these two transactions will have their individual APRs. Aside from that, there may also be penalty APR fees, which are often higher than other types of APR.
Best APR Deals
There is a wide variety of % APR credit cards that you can choose from. Some of them are listed below.
- Capital One® VentureOneSM Rewards Credit Card – Since this is a rewards card, it comes with appealing perks and bonuses for card holders. This does not have an annual fee and a foreign transaction fee. The APR and the rewards program are both favorable.
- PenFed Promise VISA Card – The introductory APR is quite satisfactory especially for those looking for good APR deals. For three good years, you can enjoy the same APR. The rate however may change up to two times a year as the Prime Rate hikes up. Nevertheless, there are no fees such as annual, balance transfer, cash advance, and late fees among others.
- Discover® Motiva Card – Purchase APR starts at 0% for over a year. The standard APR is low even after the introductory period ends. If you pay your bills on time, Motiva will gladly reward you with reduced interest rates.