Identification of APR

• Banks calculate APR for each card product using the Wall Street Journal's Prime Rate, setting it to appeal to the desired customer demographic. It shows the amount of money payable to the lender at the end of each fiscal year on the total credit card average daily balance. In simplest terms, if the APR for your credit card is 9 percent, you are supposed to pay $9 on every $100 of the average daily balance as computed by the lender. A customer will find the APR in the application, the published credit card terms and the monthly statement. Most companies take pains to emphasize the APR in prominent, bold print to curb confusion and minimize surprises.
  
  

Varying APR

• Several different APRs can exist simultaneously in one card, so it pays to read a credit offer carefully. A single credit card may offer a different APR for regular purchases and balance transfers, with a cash advance APR that's higher than the others. A common promotional tool is to offer a remarkably low APR to tempt new customers, but don't be fooled. After the introductory period, the APR resets significantly higher, and may even apply retroactively to past purchases.
  
  

Types

• Four different types of APR can apply to one credit card. These include transfer APR, purchase APR, default APR and cash APR. Transfer APR, also known as balance transfer APR, is the rate of interest when a balance is transferred from one credit card to another. Usually, this moves a balance from a higher APR card to one that costs less and offers savings to the cardholder. Purchase APR is the normal interest rate for a regular credit card purchase. Cash advance APR, or cash APR, is a rate for cash withdrawals from an ATM; since it's tantamount to a cash loan, the bank charges a premium price for this service. Lastly, default APR sets in if the cardholder defaults on his debt. This rate can be many times the amount of the purchase APR and stands as a punitive measure for late payees.
  
  

APR Considerations

• Some credit card companies charge a fixed APR for the life of the card. More common in the past, these cards are now hard to find and require excellent credit to qualify. An excellent credit rating also opens up offers for very low APR rates. However, a low credit score means a higher interest rate. In fact, some bad credit credit cards even offer an APR as high as 59.9 percent, according to Consumerist. In the credit card field, having a good credit score greatly eases the search for money-saving credit deals.
  
  

APR Tips

• The best way to keep your APR amount low is to pay off the balance at the end of every month. Timely and early payment renders any APR moot, since it's only calculated on balances over 30 days. Pay before that time, and the card becomes interest-free. Also resist the lure of the cash advance and high cash APRs that tack on additional costs.