5 must know credit card APR types to save more

Duran Mueller
Apr 4, 2007
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APR -- These three letters are going to make or break (mostly) your credit card experience. So, the better you know it the more you stand to gain. Technically standing for Annual Percentage Rate (APR) it denotes the amount of interest the credit card companies will be charging you over your credit card debt. Every credit card issuer is obliged to tell the customer about APR. Though just a number, the APR comes in different flavors.


1. The introductory APR:

This APR is the rate at which credit card companies will charge you from the beginning. It could be a low rate on your balance transfers or 0% initially to lure you into buying the credit cards. Most credit cards with 0% introductory offer come with this rate for a predefined period like for 6 months, 12 months. Credit card companies also offer low introductory APR like 4.99% etc. on balance transfers for a limited period. After the introductory period is over the APR switches to a high rate. If you wish to dispose off the credit card within the introductory APR period, technically you can get a low rate or maybe a 0% APR if the credit card offers.

2. Delayed APR:

This generally sets up after the introductory APR period has expired. Credit card owners who wish to keep the plastic with them for more than a year or even long after the introductory APR expires should seriously consider it. After attracting a customer with low introductory APR the delayed APR rate earns money for the credit card companies.

3. Penalty APR:

As the name implies the penalty APR is slapped on those who are late in their payments. Miss a payment and the penalty APR is there to greet you. Credit card companies charge a lot lot higher interest rates to defaulters. The more you default the more you pay. In addition to the penalty APR the late fees along with a decline in credit ratings is also on the cards. So, it is better to avoid ending up in such a scenario and follow your repayment schedule like religion. More than saving money it shines on your credit report.

4. Tiered APR:

Some credit card companies charge different interest rates for different outstanding balance levels. For example, a credit card company might offer 17% on balances between $1 - $1000 and 19% on balances over $1000. This way they keep interest rates manageable for those with low outstanding balances and charge more from those who have high outstanding balances.

5. Different or Categorized APR:

The credit card companies can decide that they will charge an extremely high APR on cash advance, moderate for balance transfers and maybe a 0% introductory APR on purchases. This compartmentalization of APRs is a perfect example of different APRs.

In addition to the above categories the APRs can be fixed for the entire life of credit card or can vary with time as denoted by 0% introductory APR and delayed APR.

Every credit card has one of these types of APRs, but be prepared to experience all the above flavors of the APRs in one single card if you purchase things, transfer balance, take cash advance, and do not repay on time. The credit card company will disclose you all these numbers when you make a credit card application. Some of them will be written in bold others in the fine print. It is up to you to garner your faculties, read the fine prints carefully and keep a track of these numbers. Along with good financial discipline, this will surely make your credit card experience a good and rewarding one.