anual percentage rate or per annum

northernlass_2

can any one help me out with this? what is the difference between apr and pa if there is a difference at all.

Rafter

There are a number of different ways of calculating the APR, cost of credit, annual equivalent rate etc.

The APR calculation needs to include any account fees, annual charges etc so may include more than just the interest charge.

The annual equivalent rate is usually just the interest bit.

Because interest is added to your credit card monthly, mosts cards quote a monthly rate. To get to an annual rate, you need to do a 'compound' interest calculation since you will be paying interest in month 2 on interest charged in month 1!!!

So if you monthly rate is 1%

Your annual rate is 12.68% not 12%!

Card companies are also sneaky in that they use rounding and an allowable error in the calculation to maximise the amount of interest you pay.


As a rule of thumb:

For savings go for the highest annual equivalent rate, but watch out for penalties like no interest in any month when you make a withdrawl.

For loans and credit cards, go for the lowest APR (which will include fees) and be very careful you understand the terms of any interest free deals which may only apply to balance transfers or may be lost if you miss a payment by mistake.

Good luck.

R.

northernlass_2

thankss for that im stil la bit confused, i have been offered by my credit card company 4.95pa for the life of any balance transfers i use is this a good deal

Rafter

Not a bad deal - but there may be a 2% fee which increases the APR to ~6% if you are planning to repay over 3-4 years.

Be careful if you continue to use the card for purchases though.

The BT will be charged at 4.95%, but any purchases will be at a higher rate. The BT gets paid off first normally too, so you might find yourself with an expensive debt.

If you want to use this BT offer, repay any existing balance first, do the transfer then don't use the card again for purchases.

Good luck.

R.