What Is APR?

Even if you pay off your credit card balance every month, knowing your APR is part of good credit habits.

Credit Cards
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While the best rewards credit cards can help you rack up cash back, points or miles on purchases, they usually come with high interest rates. Because of this, balances on your card can be challenging to pay off, especially if you don’t know your card’s annual percentage rate (APR). In fact, 43% of cardholders carrying a balance don’t know their credit card APR, according to a 2023 Bankrate study

What is APR?

Your credit card APR, or your interest rate, is how much extra money you'll pay on any balance you don't pay off in full at the end of each billing cycle. This rate is typically stated as a yearly rate, and it may be a fixed rate or a variable rate. If you don't know your APR, you can find it in your credit card's terms and conditions.

Most credit cards operate on a variable rate, meaning the rate can change, often rising or falling in tandem with interest rates set by the Federal Reserve. When the Federal Reserve Board raises short-term interest rates, those increases affect interest rates on credit cards as well most other lending and savings products such as savings accounts, mortgages, home equity lines of credit and other loans.

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How Does APR Affect Me?

If you’re carrying a balance on a high-interest-rate card, plan to pay it off as soon as possible, without adding any new purchases. If you receive a tax refund — and most taxpayers do — use that money to pay down debt. Even if the refund doesn’t pay off the balance in full, the reduced total will trim the amount of interest assessed. Or you may want to pick up a side hustle, using the extra money to pay off your balance.

Another option is to apply for a balance transfer card. There are many cards on the market that offer an introductory 0% APR for qualifying balance transfers. The length of these introductory periods varies, but some of the best balance transfer cards allow you to avoid interest rates for up to 21 months. You can also check to see if any current cards in your wallet are offering balance-transfer promotions.

Keep in mind that with any balance transfer, if you don’t pay your balance by the time the promotion ends, any balance left over is generally subject to your card’s normal interest rate. And read the fine print — your balance could be subject to retroactive interest charges.

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Rivan V. Stinson
Ex-staff writer, Kiplinger's Personal Finance

Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.

With contributions from