With credit cards, the APR will include the interest rate attached to your card and any other fees charged during that year. For this reason, the APR may be higher than the interest rate, as there could be an arrangement fee or other charge.
If you see an advert for a credit card, loan, or mortgage, there will always be an APR displayed. This is to make it easier for borrowers to compare products and get a good deal.
What about the ‘representative’ bit?
We’re glad you asked. The thing is, there’s not just one APR that’s attached to every credit card. The ‘representative’ that you’ll see in credit card adverts means that the APR being promoted is what just over half of customers will pay – around 51%.
The other 49% of borrowers who successfully apply for the card may pay more or less than this. If your credit history isn’t in the best shape, you may be offered a higher APR, for instance.
So, representative APR refers to the average amount you can expect to pay. You can therefore use this as a guide to help you search and compare the products that are available.
And what does ‘variable’ mean?
If the credit card you’re looking at is advertised as having a variable APR, what does this mean? Well, it will probably be written in brackets, but it’s an important word and one to look out for.
If something has an APR that’s variable, it means that the interest rate could go up or down during the time you have the credit card. Simply, the rate you get when you’re sent the card may not be the rate you’re charged later.
Interest rates can rise or fall depending on, for example, the Bank of England’s base rate. By marking an APR as variable, the lender is being clear that the interest may not stay the same.
So there you have it – all you need to know about credit card APR.
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