As long as you anticipate that you will ever have a balance on your credit card expending past the grace period afforded to you, the APR is the single most important thing about a credit card offer that you should look into. This little honey is what makes credit card companies the money.

What does APR Stand for?

APR stands for Annual Percentage Rate. What this means is how much the credit card company plans to charge you for any unpaid balance you owe them. They will use the interest rate.

The painful thing is that the APR is not really charged annually. The APR is the equivalent of what would be charged monthly times twelve times. What ends up happening is the credit card company will charge you 1/12 of the APR each month on any balance you owe the credit card company. Heard of compound interest? This works for you when you have your money in a savings account but it works against you when you have borrowed money.

HOW APR is Applied

Credit card companies have different ways of figuring out what to apply the interest rate to. The most popular way is probably to charge you the interest rate on the average balance of your account for the past month. Another way this is applied is on the average balance over two months.

What to Watch for with APRs

The big thing to watch with the APR is change. Your credit card’s APR can change in the following situations:

1. The APR was part of an introductory offer. After six months, a higher APR kicks in.
2. You get a card with a variable APR. Do not get a credit card with a variable APR. This because the APR usually only varies in one direction – up.
3. You are late with a credit card payment. All of a sudden, your old APR goes away to be replaced with a terrible one. Watch out for this one. It is a doozy.

Your Credit Score Counts

Credit card companies keep their best offers to entice the easiest customers for them. By easy, I do not mean easy to come by but easy to work with. All the credit card companies want the same customers: customers that pay their bills on time. They will use your credit score to predict what type of customer you will be for them. If you are appealing to them, they will offer you the best APRs to try to woo you over as a new customer for them.