Learn the definition of the Annual Percentage Rate credit card comparison feature
The APR, or annual percentage rate is interest that is charged on your credit card balance. The annual percentage rate does not work in quite the same fashion as standard interest because credit card interest compounds. Compounding interest means that not only do you pay interest on the amount you charged on your credit card but you can also be charged interest on the interest that you were previously charged.
Understanding your cards annual percentage rate can be difficult. It is easier to look at it in terms of actual numbers. For example, let us say that you have a $1,000 credit card bill that has an interest rate of 20%. That original $1,000 will incur interest fees of $200 for the first year that you carry the balance. The second year you will be charged an additional $40 in interest on the previous $200, which brings your interest up to $240. The next year it will compound even further and so on, until the bill is paid off.
Because credit cards are so expensive the card issuer is required to advertise the annual percentage rate. They must display this rate in a way that makes in nearly impossible for the cardholder to misunderstand how much they will actually be charged on the balance of their debt. Unfortunately, many people still wind up in this debt cycle and lose control of their finances. The ideal way to avoid it is to only spend what you can afford to pay back each month. If you pay it off within the interest free period then you will not have to spend any money on interest or worry about the cost of compounding APR.
If you are looking for a credit card with a low APR on purchases, then you should strongly consider the St.George Vertigo credit card as part of your comparison. It features a low interest rate on purchases, balance transfers and a low on-going annual fee, making the credit card very affordable to maintain.
- $55 p.a. annual fee
- 1% p.a. for 12 months (reverts to 13.24% p.a.) on purchases
- 0% p.a. for 18 months on balance transfers
- Cash Advance Rate of 21.49% p.a.
- Up to 55 days interest free
Not everyone is charged the same credit card annual percentage rate. When an application is received by the credit card company it is evaluated based on the applicants income and credit history. Those who have the better credit files and a high income will get the lowest interest rate because they are considered a less risky investment by the credit card company. By the same token, those who have poor credit or no credit and earn less money will be charged a higher interest rate because they are at greater risk to default on their debts. While the interest rate is an important consideration when shopping for credit cards it is not the only fee you should investigate. The APR is just one of many fees including annual fees and account maintenance fees that you may be charged by your card issuer.