Explain APRs !

cheeky-virgin

i am bit confued and dont understand the term of Apr...

suppose if i say i have visa card with 15.9 % apr and if i do use it regular and pay them back on time every month then where does this apr system apply ? ( or does it apply if i dont make a full payment every month ).


hope u are ggeting my question .

sdj25

APR = Annual Percentage Rate

You're exactly right. If you use the Credit Card for purchases only (i.e. buying things over the counter at a shop, or buying items online) and you pay off your balance in full every month the APR does not come into effect.

The APR is there if you need to borrow the money over a longer period. So say you buy something for £100, and you paid the balance off over a year you would (in simple terms) be paying £115.90.

Now it is a bit more complex than that - but if you pay off the balance every month then you shouldn't have to worry about this.

Robert_Sterling

sdj25 wrote:

APR = Annual Percentage Rate
The APR is there if you need to borrow the money over a longer period. So say you buy something for £100, and you paid the balance off over a year you would (in simple terms) be paying £115.90.

This is not so much "simple terms" as "incorrect terms". Your figures would be fairly accurate if the £100 was paid of "in one lump one year later". If the £100 was paid off evenly over a year you would pay nearer to £107.95.

Astaroth

APR, in theory, is supposed to be a standardised figure of the cost of having credit with a company to enable consumers to quickly and easily cross compare financial products.

APR is calculated on the annual cost of having £1,500 of credit for 1 year... this includes not only monthly interest but also things such as annual fees (as you still get with some higher credit cards)

As others have said, if you pay off a balance in full every month then the interest rate doesnt apply however it isnt strictly true to say the "APR" doesnt apply as the annual fee part may still apply (though many cards refund the fee if you spend over £X0,000 per year)

grumbler

Astaroth wrote:

...if you pay off a balance in full every month then the interest rate doesnt apply however it isnt strictly true ...

It is not strictly true also because some cards don't have interest-free period on purchases as, for example, Lloyds TSB Advance Credit Card . However, I must admit that this is rather an exception than a rule ...

Astaroth

touché

sdj25

Sorry, went a bit too "simple" and drifted into "incorrect" - or some such excuse that makes me sound less like an idiot!

If you can get your head around it, there's a good article here

http://www.efunda.com/formulae/finance/apr_calculator.cfm

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