When it comes to credit cards, one of the most important factors to consider is the Annual Percentage Rate (APR). The APR is the interest rate you’ll pay on your credit card balances if you carry a balance from month to month. Understanding how APR works can help you make informed decisions about whether to get a credit card and which card is right for you.
What is APR?
APR is the interest rate charged on your credit card balances. It’s expressed as a percentage and is typically calculated annually, but charged monthly. For example, if you have a credit card with a 20% APR, you’ll be charged 1.67% interest each month on any outstanding balances.
Why APR Matters
APR matters because it can significantly impact the cost of using your credit card. If you carry a balance from month to month, you’ll be charged interest on that balance, which can add up quickly over time. For example, if you have a $1,000 balance on a credit card with a 20% APR and you only make the minimum payment each month, it could take you years to pay off the balance and you’ll end up paying hundreds or even thousands of dollars in interest.
How to Get a Credit Card with a Low APR
If you’re considering getting a credit card, it’s important to look for a card with a low APR. Here are a few tips to help you find a credit card with a low APR:
- Check your credit score: Your credit score plays a big role in the APR you’ll be offered. Generally, the higher your credit score, the lower your APR. Before you apply for a credit card, check your credit score and see where you stand.
- Compare offers: There are many credit cards on the market, each with its own APR and other features. Take the time to compare different offers and find a card that offers a low APR and other benefits that match your needs.
- Consider balance transfer offers: If you already have credit card debt, consider a card with a 0% APR balance transfer offer. These offers allow you to transfer your existing balances to a new card and pay no interest for a set period of time, usually 12-18 months.
- Ask for a lower APR: If you already have a credit card with a high APR, consider calling your card issuer and asking for a lower rate. If you have a good payment history and a strong credit score, your issuer may be willing to work with you to lower your APR in credit card.
Using Your Credit Card Responsibly
While getting a credit card with a low APR is important, it’s equally important to use your card responsibly. Here are a few tips to help you use your credit card wisely:
- Pay on time: Paying your credit card bill on time is one of the most important things you can do to maintain a good credit score and avoid interest charges and fees.
- Pay more than the minimum: If you carry a balance from month to month, try to pay more than the minimum payment each month. This will help you pay off your balance faster and save money on interest charges.
- Avoid cash advances: Cash advances on your credit card often come with high fees and interest rates. Avoid using your credit card for cash advances whenever possible.
- Use rewards wisely: If your credit card offers rewards, be sure to use them wisely. Don’t overspend just to earn rewards, and be sure to pay off your balances in full each month to avoid interest charges.
When you are considering getting a credit card, it’s important to not just focus on the APR, but also consider the other features and benefits of the card. For example, some credit cards offer rewards programs that allow you to earn points or cashback on your purchases. These rewards can add up quickly and help offset the cost of any interest charges or fees.
Other features to look for in a credit card include:
- Introductory offers: Some credit cards offer introductory rates or bonuses, such as a 0% APR for the first few months or a sign-up bonus for meeting certain spending requirements. These offers can be a great way to save money or earn rewards when you first get your card.
- Credit limit: The credit limit on your card determines how much you can spend on the card. Look for a card with a limit that fits your needs and spending habits. Keep in mind that using too much of your available credit can hurt your credit score, so it’s best to keep your balances low.
- Fees: Credit cards often come with fees, such as annual fees, balance transfer fees, or foreign transaction fees. Be sure to read the fine print and understand all the fees associated with a card before you apply.
- Fraud protection: Credit card companies have measures in place to protect against fraud and unauthorized charges. Look for a card with robust fraud protection features, such as real-time alerts or zero liability for fraudulent charges.
Overall, when considering getting a credit card, it’s important to weigh the pros and cons and choose a card that matches your needs and spending habits. By understanding the APR and other features of your credit card, you can use your card responsibly and enjoy the benefits of credit card use while avoiding unnecessary fees and interest charges.