Low APR credit card and APR
There are a few cards on the market offering low APRs and these would appear to be the best credit cards to get but is this necessarily true? Also what is this APR anyway? Every card has one and it is used to compare them but what does it actually mean? If you have any curiosity as to the answer to any of these questions then hopefully this article will shed some light on things. First things first what does APR stand for? Well it stands for annual percentage rate but that doesn't necessarily give us much of a clue so we may need to delve a little deeper.
APR standard for Annual Percentage Rate and is the rate as a percentage that you pay annually. Clever, huh? It is the card's effective annual rate. All of this means that it is the amount that you can expect to pay annually including all of the fees and other charges that are levied against you as a customer. It was brought in, and made a government requirement in the UK, through a paper called the Consumer Credit Act 1974.
In the US and the UK, disclosing the APR is now an industry and governmental requirement. This means that it has to be disclosed to consumers so that they can make an informed choice and know the real cost of having the card. The APR is the effective annual rate of the card. In the UK the need for credit card companies to disclose full details of their credit cards was made a legal requirement under the Consumer Credit Act 1974. The way that is calculated in the UK, and across Europe, is different to how it is done in America so the interest rates here look higher than a similar card in the US.
However, it is not just a simple matter of looking at the APR and going, ah that is how much I will need to repay over a year. The APR is an approximation of the amount you will need to pay. If you end up paying off your balance over the year at a higher rate than the average you will pay less money than the APR would suggest. Similarly if you pay less then you are going to end up paying considerablye more. For example, an APR of 16.9% would seem to suggest that on a 1000 borrowing throughout a year you are going to pay off, £1169 at the end of the year. This isn't the case, it could be more or less than this.
This brings us to what exactly is considered a low APR credit card. You have to remember that the credit card industry is extremely fast moving and new cards are introduced all the time. However a typical APR is around 16% or 17%. Of course this goes up and down as the years go by. A card with an APR lower than 10% is good and one approaching 5% is very good. The lowest APR card on the market at the moment, for example, is 6.8% although there are cards with rates of around 8% also available.
Finally low APR credit cards are generally more difficult to come by than their standard APR cousins. People are only accepted for these cards if they have a strong credit history. This is because the interest is what makes the credit card companies money and obviously they want to make as much as they can. If you want a low APR credit card then it may be best to work on your credit rating first to improve your chances of being accepted for one. Also remember that, as mentioned above, it is always worth examining other features of the card as some of the higher APR cards may turn out better for you as an individual.
APR standard for Annual Percentage Rate and is the rate as a percentage that you pay annually. Clever, huh? It is the card's effective annual rate. All of this means that it is the amount that you can expect to pay annually including all of the fees and other charges that are levied against you as a customer. It was brought in, and made a government requirement in the UK, through a paper called the Consumer Credit Act 1974.
In the US and the UK, disclosing the APR is now an industry and governmental requirement. This means that it has to be disclosed to consumers so that they can make an informed choice and know the real cost of having the card. The APR is the effective annual rate of the card. In the UK the need for credit card companies to disclose full details of their credit cards was made a legal requirement under the Consumer Credit Act 1974. The way that is calculated in the UK, and across Europe, is different to how it is done in America so the interest rates here look higher than a similar card in the US.
However, it is not just a simple matter of looking at the APR and going, ah that is how much I will need to repay over a year. The APR is an approximation of the amount you will need to pay. If you end up paying off your balance over the year at a higher rate than the average you will pay less money than the APR would suggest. Similarly if you pay less then you are going to end up paying considerablye more. For example, an APR of 16.9% would seem to suggest that on a 1000 borrowing throughout a year you are going to pay off, £1169 at the end of the year. This isn't the case, it could be more or less than this.
This brings us to what exactly is considered a low APR credit card. You have to remember that the credit card industry is extremely fast moving and new cards are introduced all the time. However a typical APR is around 16% or 17%. Of course this goes up and down as the years go by. A card with an APR lower than 10% is good and one approaching 5% is very good. The lowest APR card on the market at the moment, for example, is 6.8% although there are cards with rates of around 8% also available.
Finally low APR credit cards are generally more difficult to come by than their standard APR cousins. People are only accepted for these cards if they have a strong credit history. This is because the interest is what makes the credit card companies money and obviously they want to make as much as they can. If you want a low APR credit card then it may be best to work on your credit rating first to improve your chances of being accepted for one. Also remember that, as mentioned above, it is always worth examining other features of the card as some of the higher APR cards may turn out better for you as an individual.
About the Author:
The financial author Ben Harper regularly posts articles on financial based websites. Read more about the UK Card and Compare credit card here.
posted by Credit Counseling at
8:24 AM
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