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APR (Annual Percentage Rate) Explained


Credit card companies are in the business of making money, and one way they do that is by charging interest.

When you apply for a card, you’ll see an interest rate referred to as the APR, or Annual Percentage Rate. To empower you as a consumer, it’s important to understand the APR (Annual Percentage Rate) and how it impacts your purchases.

APR is the total cost of borrowing money, expressed as a percentage of the total owed, applied per year. Let's say you charged $1,000 for merchandise and your APR is 24%. In a year, you'd owe $1,240. That's the $1,000 you owe plus $240 in interest and fees (24% of $1,000).

Most commonly, APR is "compounded" – or applied – monthly. This can make the math a bit trickier. That means you're charged 2% each month. If you owe $1,000 at the end of your monthly statement period, you'd be charged $20 in interest. Your total due would be $1,020. If you made no payment, you'd be charged interest on the new balance, which is now $1,020. Interest and fees for the second month would be $20.40.

That extra $0.40 might not seem like much, but it adds up over time. As Albert Einstein once said, the most powerful force in the universe is compound interest. Lowering your APR means your monthly payments and total costs will be lower. In many cases, it also means getting out of debt sooner.

When shopping around for cards, compare the APR to secure one with the best deal and lowest APR possible. You can also call and speak with your current credit card company to see what options there might be to lower your APR. 

PrimeWay is a Houston based credit union that offers a number or credit card options with some of the lowest rates available. For more information, check out our Credit Cards page.

APR (Annual Percentage Rate) Explained

To empower you as a consumer, it’s important to understand the APR (Annual Percentage Rate) and how it impacts your purchases.

Author Bio


Since 1937, PrimeWay Federal Credit Union has been a not-for-profit organization dedicated to providing superior financial services to members in the Houston area. We offer more personalized services than you'll traditionally find at more conventional financial institutions. Our hallmarks are low interest rate loans, higher dividends on deposits and excellent member services.

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