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
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
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.