Plain-language definition
Annual percentage rate is an annualized rate used to describe the cost of credit. A credit card can list different APRs for purchases, balance transfers, cash advances, or other balance categories.
Why it matters
APR helps compare rates and estimate interest, but it is not the only cost. Fees, balance methods, grace-period eligibility, transaction type, and the timing of payments can change the amount charged.
Example
A simplified estimate for a $5,000 average balance at 24% APR divides 24% by 12 to obtain 2% for one month, producing an estimated $100 interest charge. An actual daily-balance calculation may differ.
What to check on your statement
Use the term as a starting point, then locate the matching label, balance category, date, fee, or rate on the current statement and cardmember agreement.
Common confusion
- APR is annualized, but an issuer can calculate interest during each billing cycle.
- A purchase APR may not be the same as a cash advance or balance transfer APR.
Related learning
Related tools
Sources
- Consumer Financial Protection Bureau — Credit card interest rates and APR
- Consumer Financial Protection Bureau — Credit card interest calculation
Sources are listed so readers can verify the key facts, assumptions, and limitations behind this page.
This definition is general education and should be checked against the current statement, agreement, and official guidance when making a decision.